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21–428 PDF 2006

S. Hrg. 109–233

MONITORING CMS’ VITAL SIGNS:

IMPLEMENTATION OF THE MEDICARE

PRESCRIPTION DRUG BENEFIT

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

APRIL 5, 2005

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

AMY B. NEWHOUSE, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Akaka .................................................................................................. 3

Senator Levin .................................................................................................... 4

Senator Lautenberg .......................................................................................... 6

Senator Carper ................................................................................................. 7

Senator Pryor .................................................................................................... 29

Prepared statement: 

Senator Coburn ................................................................................................. 41

WITNESSES 

TUESDAY, APRIL 5, 2005

Hon. Mark McClellan, M.D., Ph.D., Administrator, Centers for Medicare and 

Medicaid Services ................................................................................................. 10

Marcia Marsh, Vice President for Agency Partnerships, Partnership for Public 

Service ................................................................................................................... 32

Ann Womer Benjamin, Director, Ohio Department of Insurance ........................ 34

ALPHABETICAL LIST OF WITNESSES

Benjamin, Ann Womer: 

Testimony .......................................................................................................... 34

Prepared statement .......................................................................................... 85

Marsh, Marcia: 

Testimony .......................................................................................................... 32

Prepared statement with attachments ........................................................... 64

McClellan, Hon. Mark, M.D., Ph.D.: 

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 42

APPENDIX

Questions and answers submitted for the record from Dr. McClellan ................ 94

Question and answer submitted for the record from Ms. Marsh ......................... 107

(1)

MONITORING CMS’ VITAL SIGNS: 

IMPLEMENTATION OF THE MEDICARE 

PRESCRIPTION DRUG BENEFIT 

TUESDAY, APRIL 5, 2005

U.S. SENATE,

OVERSIGHT OF GOVERNMENT MANAGEMENT,

THE FEDERAL WORKFORCE, AND THE

DISTRICT OF COLUMBIA SUBCOMMITTEE,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:07 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. George V. 

Voinovich, Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich, Akaka, Levin, Carper, Lautenberg, 

and Pryor. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Good morning. The Subcommittee on Oversight of Government Management, the Federal Workforce, and the 

District of Columbia will come to order. Good morning and welcome 

to today’s hearing, entitled ‘‘Monitoring CMS’ Vital Signs: Implementing the Medicare Prescription Drug Program.’’ This hearing 

will provide an opportunity to continue our examination of the 

management challenges confronting the Centers for Medicare and 

Services and ensure that the agency has the financial and human 

capital resources it needs to get the job done. 

There is much at stake. For many, access to prescription drug 

medications is a matter of life and death and a decent quality of 

life. Today, conditions that used to require surgery or in-patient 

care can now be treated on an out-patient basis with prescription 

drugs. However, often times the cost of these medications is prohibitive. We have to ensure seniors have access to these life-saving 

medications and take advantage of the new benefit. If it is properly 

administered, the new Medicare benefit in my opinion will result 

in the most significant improvement in public health since 1965 

when Medicare came into existence. 

CMS has learned many lessons during the recent implementation of the new Medicare drug discount card, which will assist it 

as it continues with implementation of the full prescription drug 

benefit. While I do believe there are still a number of hurdles the 

agency must overcome before the launch of that full Medicare drug 

2

benefit in 8 months, we would be remiss not to recognize the success CMS and Dr. McClellan have had in the past year. 

Since the last hearing I held on this topic in April 2004, CMS 

has successfully enrolled more than 6.2 million seniors in the discount drug card program. These seniors are saving between 12 and 

21 percent of the cost of their prescription medication. In addition 

to those savings, I believe the most important part of the discount 

drug card is the transitional assistance for low-income seniors—

those under 135 percent of the Federal poverty level. These individuals received $600 in 2004 and 2005 to help pay for prescription 

drugs. 

I am pleased that 1.75 million low-income seniors have taken advantage of the transitional assistance to date. Getting these seniors 

enrolled took considerable work, and I saw this first hand. I am 

proud to say that I join with CMS and the Ohio Senior Health Insurance and Information Program (OSHIIP), the Ohio Area Agency 

on Aging, and other community groups that traveled around Ohio 

last year. We held 14 roundtables and training sessions to educate 

and encourage seniors without drug coverage, especially those with 

low incomes, to sign up for the card. Together, my staff held an additional 426 sessions throughout Ohio. I want to thank CMS and 

the OSHIIP program in Ohio for participating and assisting us in 

efforts to get Ohioans signed up for the program. 

And, Mark, I want to thank you for coming on two occasions to 

Ohio to help us get the job done. In fact, we went to the training 

session together for an hour. 

It has paid off for some 279,000 seniors in Ohio who have signed 

up for the drug card. These individuals are expected to save about 

$134 million on the cost of their drugs in 2005. Ohio’s low-income 

beneficiaries, who enrolled in the program by the end of 2004, will 

have access to $73 million in direct financial assistance with drug 

costs. While these seniors will be able to take advantage of these 

savings until the full benefit begins, it is now time to turn our attention to the full drug benefit. 

Using the experience of the implementation and the ongoing enrollment in the discount card over the past years, it is the responsibility of Congress and the Administration to make certain that 

CMS has the means to implement the much larger and more complex, full drug benefit in an efficient and effective manner. 

Preparing to administer the program in the tight 2-year time 

frame is quite a challenge. However, from what I have witnessed, 

CMS is well on its way. On January 21 of this year, CMS took a 

crucial first step toward fulfilling the Act by publishing the final 

regulations for the new drug benefit and the enhanced health coverage options through the Medicare Advantage program. I understand that the agency has an ambitious timeline to review and approve potential plan sponsors, work with employers and retirement 

systems that choose to apply for the retiree subsidy, assist States 

in adapting their prescription savings plans to help their beneficiaries further benefit from the new Federal coverage, and, of 

course, communicate and educate Medicare beneficiaries about 

their options and ultimate enrollment in the plans. Having the 

right people at CMS is the key to successful implementation of this 

program. 

3

And even before the passage of the Medicare Modernization Act, 

CMS—and this is what we are here to talk about today—was coping with administrative challenges. For example, a 2002 report by 

the National Academy of Social Insurance highlighted the fact that 

between fiscal years 1992 and 2002, benefit outlays increased 97 

percent and claims grew by 50 percent; however, program management funds increased only 26 percent, and authorized full-time 

equivalent positions grew by 12 percent. 

Currently, 18 percent of CMS’ workforce is eligible to retire, and 

the number is significantly higher, 30 percent, in the Senior Executive Service. In addition, over the past 3 years, CMS has lost a 

quarter of its career executives to retirement. If that does not seem 

like enough of a daunting challenge, 46 percent of the existing 

CMS workforce will be eligible for regular retirement by 2009. 

These statistics will sound familiar to anyone knowledgeable of the 

Federal Government’s human capital challenges. 

Before I introduce the witnesses, I would like to remind my colleagues that the purpose of this hearing is not to discuss the details nor the merits of the program. I know there is still some controversy about the program. We are here to determine if the agency 

has the wherewithal to get the job done, to get it out on the street. 

I understand some have concerns surrounding the program. However, it is the law. We are here today to ensure CMS has the resources and personnel capacity to ensure that the benefit is implemented as Congress has directed. 

I would now like to call on Senator Akaka for his opening statement. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. I have 

long supported efforts to establish a meaningful Medicare prescription drug benefit for the elderly and disabled, and I remain committed to improving the Medicare prescription drug benefit so that 

seniors are able to obtain all of the medication that they need. 

However, I voted against the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 because it offers a false 

promise to all seniors. Under the MMA, new prescription drug 

plans will be available to individuals covered by Medicare beginning in January 1, 2006. The Center for Medicare and Medicaid 

Services (CMS) recently issued the final regulations implementing 

this benefit. 

MMA coverage, in my mind, could actually, I feel, harm many 

seniors. For example, Hawaii’s seniors who have incomes below 100 

percent of the poverty level and obtain their medication through 

Hawaii’s Medicaid program will be worse off under this plan because they will have to make co-payments for their prescription 

medications. I fear that too many low-income seniors will not be 

able to afford these co-payments. Creating a barrier that will prevent some low-income seniors from obtaining needed medications 

will likely increase overall health care costs. Denying necessary 

medication could lead to more hospital visits and other health-related costs. 

4

Mr. Chairman, I intend to introduce legislation shortly to remove 

the co-payment requirement for dual-eligible beneficiaries, and I 

hope my colleagues will support me in this effort. 

Mr. Chairman, I am also concerned that Medicare and Medicaid 

dual-eligible seniors may have to alter their existing treatments because of the formularies imposed by prescription drug plans. For 

example, HIV and AIDS patients and individuals in nursing homes 

may be forced to alter the physician prescription because their 

formularies for their Medicare prescription plans are too restrictive 

and are less generous than their existing Medicaid drug coverage. 

More must be done to protect the ability of beneficiaries to obtain 

for themselves the best possible treatment, rather than being subject to arbitrary formulary determinations. 

Senator Voinovich, I thank you for calling today’s hearing to discuss with our witnesses the implementation of Medicare Part D. 

This portion of Medicare will be difficult to administer due to the 

complex design of the prescription drug benefit plans and low-income subsidies. In particular, I look forward to discussing today 

what steps will be taken to ensure that seniors will have access to 

the information necessary to make informed choices among private 

plans and utilize the benefits for which they may be eligible. 

This is a complicated task. Different communities have diverse 

needs and challenges that must be met to make sure that underserved populations will not be unfairly denied access to assistance. 

It will be critical that access not be denied to seniors because of 

language or cultural barriers or to those who do not have access 

to the Internet, or even a telephone. We must take steps to ensure 

that even those in isolated communities, such as those on the island of Molokai, are provided with the information necessary to 

utilize all of the benefits that they may be entitled to under the 

MMA. 

I look forward to the testimony, and I want to add my welcome 

to Mark McClellan, Marcia Marsh, and Ann Benjamin. 

Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you. Senator Levin. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Thank you, Mr. Chairman, and thank you for 

holding this important hearing. As we all remember, a few years 

ago we had a vigorous debate about the future of Medicare and the 

best way to deliver an affordable, voluntary, universal, and guaranteed prescription drug benefit to our seniors. Many seniors, retirees, were skeptical of the Medicare bill that was enacted in 2003, 

and, quite frankly, so was I. Now, 2 years later, we are beginning 

to get some answers which I hope we will hear about today. For 

example, what is the increased cost of the drug benefit since the 

Department of Health and Human Services is apparently barred 

from negotiating lower prices for Medicare beneficiaries? How 

many retirees will lose the solid prescription drug coverage that 

they now have? 

These were major concerns back in 2003. The law has given the 

Centers for Medicare and Medicaid Services, or CMS, the authority 

to fashion implementing regulations that could possibly ease some 

5

of the problems. I hope to hear today about what CMS is planning 

to do with that authority. 

The Administration has been less than forthcoming in providing 

accurate information to Congress about the cost of the Medicare 

drug benefit. In 2003, while the Administration was publicly stating that the drug benefit would cost no more than $400 billion over 

10 years, the chief actuary for CMS, Richard Foster, had internal 

documents predicting costs closer to $534 billion. When Congress 

asked Mr. Foster to provide those estimates during the House and 

Senate debate on the bill, the former CMS Administrator refused 

to make either Mr. Foster or those estimates available. New budget 

documents now project a cost in the neighborhood of $720 billion. 

The huge increase in the cost of this program in just 2 years 

from the original $400 billion price tag goes beyond sticker shock. 

Accurate cost information and honest cost projections are critical as 

the drug benefit is implemented early next year and Congress begins to evaluate both the program and possible changes to it. CMS 

needs to satisfy the people of this Nation that it will provide accurate cost information. 

A related issue is the CMS decision to use critically needed administrative resources to produce covert broadcast materials to try 

to promote the new Medicare drug benefit. Last year, CMS distributed a videotape on the program benefits in the guise of an actual 

news report, when in reality the reporter was a paid actor. 

CMS is not alone in this. Political consultants and commentators 

were paid hundreds of thousands of dollars to promote Department 

of Education policies and tens of thousands to promote a program 

at the Department of Health and Human Services. This type of 

covert journalism is just plain wrong. And although last year the 

Government Accountability Office, the GAO, concluded that this 

practice violated Federal law, a memorandum by the Administration released just last month states that the Executive Branch is 

‘‘not bound’’ by GAO legal advice. Disguising the hand of government in broadcast materials is not only against the law, it undermines the operation of a free press. Government should be protecting a free press, not trying to buy it. It is my hope that CMS 

will tell us today that it will end the use of covert broadcasting materials to promote the Medicare drug benefit and to use those critically needed resources for administration of this program. 

I want to especially commend Senator Lautenberg for his early 

blowing of the whistle on these abuses and for his persistence in 

this matter. It has been brought to the attention of the public as 

an abuse which must be corrected, and I salute him for it. 

I would like to thank Dr. McClellan for appearing here this 

morning and for his public service over the years, and I look forward to his testimony as well as the testimony of the other witnesses. 

[The prepared statement of Senator Levin follows:]

PREPARED STATEMENT OF SENATOR LEVIN 

Thank you, Mr. Chairman, for holding this hearing. I know that many seniors and 

retirees are skeptical of the Medicare bill that was enacted in 2003, and quite frankly, so am I. 

6

As we all remember, we had a vigorous debate 2 years ago about the future of 

Medicare and the best way to deliver an affordable, voluntary, universal, and guaranteed prescription drug benefit to our seniors. 

Now, 2 years later, we are beginning to get some answers, which I hope we will 

hear about today. For example, what is the increased cost of the drug benefit since 

the Department of Health and Human Services is apparently barred from negotiating lower prices for Medicare beneficiaries? How many retirees will lose the solid 

prescription drug coverage they now have. These were major concerns of mine in 

2003. The law has given the Center for Medicare and Medicaid Services or CMS the 

authority to fashion implementing regulations that could possibly ease some of the 

problems. I hope to hear today about what CMS is planning to do with this authority. 

Another concern that needs to be aired today is the fact that, from the beginning, 

this Administration has been less than forthcoming in providing accurate information to Congress about the cost of the Medicare drug benefit. For example, in 2003, 

while the Administration was publicly stating the drug benefit would cost no more 

than $400 billion, the chief actuary for CMS, Richard Foster, had internal documents predicting costs closer to $534 billion. When Congress asked Mr. Foster to 

provide those estimates during the House and Senate debate on the bill, the former 

CMS Administrator refused to make either Mr. Foster or those estimates available. 

New budget documents from the Administration now project a cost in the neighborhood of $720 billion. 

The huge increase in the cost of this program in just 2 years from the original 

$400 billion price tag goes beyond sticker shock. Accurate cost information and honest cost projections are critical as the drug benefit is implemented early next year, 

and Congress begins to evaluate both the program and possible changes to it. CMS 

needs to satisfy the people of this nation that it will provide accurate and honest 

cost information. 

A related issue is the policy decision to use covert broadcast materials to try to 

promote the new Medicare drug benefit. Last year, CMS distributed a videotape on 

the program benefits in the guise of an actual news report when, in reality, the reporter was a paid actor. Political consultants and commentators were paid hundreds 

of thousands of dollars to promote Department of Education policies and tens of 

thousands to promote a program at the Department of Health and Human Services. 

This type of covert journalism for hire is plain wrong. And although last year, the 

Government Accountability Office (GAO) concluded that this practice violated two 

Federal laws, a memorandum by the Administration released just last month states 

the Executive Branch is ‘‘not bound by GAO legal advice.’’

Disguising the hand of government in broadcast materials is not only against the 

law, it undermines the operation of a free press. Government should be protecting 

a free press not trying to buy it. It is my hope that CMS will tell us today that 

it will end its use of covert broadcasting materials to promote the Medicare drug 

benefit. I commend Senator Lautenberg for his early blowing the whistle on these 

abuses and his persistence in this matter. 

I would like to thank Dr. McClellan for appearing here this morning. I look forward to his testimony as well as the testimony of the other witnesses.

Senator VOINOVICH. Senator Lautenberg. 

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Thanks, Mr. Chairman, and thanks, Senator Levin, for mentioning the fact that I had been following this 

trail of what I will call propaganda very arduously. And, Dr. 

McClellan, you have been on the job long enough to look back 

longingly, I assume, and wonder which job was a more welcoming 

one. But you have the intelligence and the backbone to do these 

things, so we are not going to take it easy on you, I promise. 

It has been almost a year and a half since President Bush signed 

this law that is going to make such profound changes in the Medicare program, and we have since learned that the information 

given the Congress during the debate on this bill was false. The 

cost was understated by hundreds of millions of dollars, and, unfortunately, the deception did not end there. Since the bill was passed, 

the Administration has engaged in illegal propaganda, defined by 

7

the GAO, in what I will call an attempt to sell this bill of goods 

to the American people. And it was done by producing the video 

news releases, as mentioned by Senator Levin, distributed to local 

television stations for use in their news programs. And as someone 

who saw these videos on their local stations, they could believe that 

they were listening to a valid news commentary instead of a sales 

pitch. 

In fact, at one point they featured a fake news reporter paid for 

by the government and reading a script prepared by the government. And it is not news. It is government propaganda. But the 

viewers who were exposed to this material on TV stations around 

the country had no way of knowing that. These videos were produced with money from the Medicare trust fund. Three propaganda 

releases were produced, two in English and one in Spanish. And in 

one script, the Administration suggested that the local news anchor 

in doing the video concluded her remarks by being identified as Reporter Karen Ryan, and she helped sort through these details. That 

was described by the news anchor. But Karen Ryan was not working for a news organization that was part of our free press. She 

was working for the government and getting paid to say what they 

wanted her to say. And, again, that is not news. That is propaganda. 

On May 19, 2004, the Government Accountability Office issued 

a legal opinion that HHS and CMS had violated the law by using 

taxpayer dollars to fund covert propaganda. 

Now, I asked GAO to investigate this matter further to determine exactly where the Administration had crossed the line between legitimate information and political propaganda. And it is 

wrong to pull the wool over the American people’s eyes. And if you 

try to do it with their own money, it is illegal. 

But that was not the end of the matter. Basically, HHS and the 

Centers for Medicare and Medicaid Services thumbed its nose at 

the law. It is bad enough that the Administration crossed the line 

between information and propaganda, but it is even worse to ignore 

a legal opinion from the Government Accountability Office. When 

you do that, you are telling the American people that we are not 

accountable. And I ask what kind of an example that sets. 

Mr. Chairman, if the Administration or the White House, can say 

those laws do not apply to us, well, what laws do apply to them? 

I think all laws apply to all of us, and one of the things that I want 

to do is make sure that redress can be sought in the courts by organizations to break through the sovereign immunity proposition. To 

question that in the courts we should not have to do that, and normally one would not be able to do it. But we have to find an opportunity to give the public an honest account on this. 

Mr. Chairman, I look forward to hearing from Dr. McClellan. 

Senator VOINOVICH. Thank you, Senator Lautenberg. Senator 

Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks, Mr. Chairman. 

To Dr. McClellan, welcome. It is good to see you, and we thank 

you for your continued service in this role. 

8

I just want to follow up briefly on Mr. Lautenberg’s comments. 

There is obviously a difference between propaganda and information that is really meant to inform seniors as they try to make 

what can be difficult decisions between now and the beginning of 

next year. And the key is, as in most things, to find the right balance. And in our own State, as one who voted for the Medicare 

bill—a tough decision, maybe the toughest that I have cast here in 

my first 4 years in the Senate—I have a strong interest—and I 

know it is shared by our at-large Congressman, Congressman Castle—that we do the best job we can to figure out how to take the 

State’s drug benefit—we have a State drug benefit that we signed 

into law during my time as governor—and how do we really wrap 

these two benefits together so that we have a State benefit and a 

Federal benefit, that they complement each other, and we derive 

the very best benefit, not complex but as comprehensive as we can, 

for our seniors. 

And in the end, I think back on my own Mom, who recently 

passed away, and how confusing things like this are to her and, 

frankly, to all of our mothers, grandmothers, and grandfathers. We 

need to focus real hard—and we are certainly trying to do that in 

my own State with our own congressional delegation—on making 

sure that older folks and their children understand what their options are and make the right choices. 

Having said that, Mr. Chairman, I would just reiterate, as others 

have, that we are pleased to have this hearing today. We are grateful to you for calling us together. This legislation signed into law 

is obviously an important one for our country and an important one 

for a lot of our citizens. The policies that we have adopted obviously cannot be implemented if CMS does not have the resources 

and the staffing that you need. We understand that, and we want 

to be supportive to meeting your needs. 

I again want to congratulate Dr. McClellan for the job that he 

has done so far in getting this historic piece of legislation off the 

ground. Obviously, there is a lot to be done, but I appreciate the 

complexity of the task that has been presented to CMS and believe 

that you and your colleagues have done a good job so far. 

I think that the next 8 or 9 or 10 months will in large part dictate whether this program is going to be successful. The launch 

and all kinds of things—my friend here, Carl Levin, is from Detroit. They worry a lot about the auto industry, and I do, too. We 

have got a couple of big auto plants in my State. We worry about 

launching new public sector. We are going to launch a new Pontiac, 

Solstice, from our GM plant in Wilmington later this spring. The 

launch has to be perfect in order to help ensure the future of that 

car and, frankly, help ensure the future of the company. 

Having said that, the launch of this Medicare drug benefit will 

in large part, I think, help to determine whether it is going to be 

around for a while and whether it is going to realize the potential 

and promise that it has. 

We need to make sure that all stakeholders have access to the 

information that they need and that they understand the changes 

that are to come. We need to be able to present this information 

to people so that folks the age of my mother, who died in her 80s 

last week, can come close to understanding it and that their chilVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
9

dren and others around them can understand it if their loved ones 

cannot. 

We need to make sure that States, for example, receive ample assistance from CMS to identify the dual-eligible population, and I 

think this is vitally important. Seniors who comprise this dual-eligible population often have special needs, and we must make sure 

that this population is transitioned smoothly into the new benefit, 

or as smoothly as possible. We need to make sure that doctors, 

pharmacists, nursing homes, and other providers understand the 

new benefit and how it will affect their patients. And, finally, we 

must ensure that CMS has the resources that are needed to oversee the many plans that we hope will participate. 

CMS is responsible for ensuring that plans do not discriminate 

against beneficiaries, that their formularies include a sufficient 

array of drugs so that seniors can get all the medications that they 

need, and that the plans have appropriate safeguards in place to 

deal with the complaints and appeals and other disputes that are 

sure to come. 

Again, I just want to repeat how important it is that we do this 

right, get it right the first time out, and I am committed to seeing 

that this historic new benefit is implemented as smoothly as possible, and I hope that CMS will continue to do the good work that 

you have begun in this regard. 

Mr. Chairman, thank you. 

Senator VOINOVICH. Thank you, Senator Carper. That is exactly 

why we are here today. We want to make sure this thing is 

launched properly and that people take advantage of it. 

I would like to welcome Dr. Mark McClellan today. Dr. McClellan has been serving as CMS Administrator since March 25, 2004. 

It has not even been a year since Dr. McClellan has taken over. 

He succeeded Tom Scully, who left the agency before the program 

he promoted was launched, leaving you perhaps in the lurch a bit. 

But Dr. McClellan is used to taking on daunting challenges. 

Prior to taking this post, he served the Bush administration in 

the Food and Drug Administration and in the White House as a 

member of the President’s Council of Economic Advisers. Success 

at any agency is the result of strong leadership, and that begins 

at the top. I have been impressed with Dr. McClellan’s drive and 

dedication. I look forward to hearing from him about the challenges 

he has identified and the steps the agency has taken to address 

them in order to ensure that all 43 million Medicare beneficiaries 

have the opportunity and information they need to take advantage 

of the drug benefit. 

Testifying on our second panel of our witnesses today are Marcia 

Marsh from the Partnership for Public Service and Ann Womer 

Benjamin from the Ohio Senior Health Insurance Information Program, and she is the Director of the Department of Insurance of 

Ohio. Both Ms. Marsh and Ms. Benjamin have partnered with 

CMS throughout the past year to help the agency advance different 

aspects of the drug benefit. They will provide valuable insight 

about the agency’s progress and thoughts on how CMS might better position itself to ensure the successful implementation of the 

benefit. 

10

1The prepared statement of Dr. McClellan appears in the Appendix on page 42. 

It is the custom of this Subcommittee, Dr. McClellan, and the 

other two witnesses, that you are sworn in. Will you stand and I 

will administer the oath. Do you swear that the testimony you are 

about to give this Subcommittee is the truth, the whole truth, and 

nothing but the truth, so help you, God? 

Dr. MCCLELLAN. I do. 

Ms. MARSH. I do. 

Ms. BENJAMIN. I do. 

Senator VOINOVICH. Let the record show they answered in the affirmative. Dr. McClellan, welcome. 

TESTIMONY OF HON. MARK McCLELLAN, M.D., PH.D.,1 ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Dr. MCCLELLAN. Mr. Chairman, thank you. 

Chairman Voinovich, Senator Akaka, and distinguished Members 

of the Subcommittee, I want to thank all of you for inviting me to 

provide an update on the implementation of the Medicare Modernization Act of 2003 and, in particular, on bringing critically 

needed help with drug costs to all Medicare beneficiaries. With the 

important new hiring and management provisions and the support 

for our agency that were included in the Medicare law, we are on 

track to provide new prescription drug coverage and new Medicare 

Advantage plan options to our 43 million beneficiaries to help them 

both prevent diseases and keep their medical costs down. Millions 

of low-income beneficiaries, almost a third of our beneficiaries, will 

receive comprehensive prescription drug coverage at little or no 

cost. 

Mr. Chairman, you and your colleagues have long emphasized 

the importance of healthy and up-to-date government organizations 

to provide effective, up-to-date government services. Thanks to your 

leadership, the Medicare law has given us new authorities to reform our agency, to bring new expertise and perspectives to our 

dedicated professional staff, to meet our new responsibilities in providing these up-to-date benefits in Medicare. And I want to thank 

this Subcommittee, and particularly you, Mr. Chairman, for providing CMS with the flexibilities needed to hire individuals quickly 

with the skills required to implement the new Medicare law. Using 

the new authorities that you have provided, we have undertaken 

nothing less than what has been called an extreme makeover of our 

most important resources at CMS—our human resources. 

We have revamped our entire human capital management plan 

and our hiring process, and we have realigned our functional 

groups inside of CMS. Through this strategic process, we have been 

building a staff that possesses new talents aligned with our new 

services, including individuals with expertise in drug benefits, in 

pharmacy services, including the specialized pharmacy services 

provided in nursing homes, in retiree health benefits, in contracting with health plans, in disease management and prevention, 

in quality measurement and quality improvement programs, and in 

many other areas related to helping our diverse population of seniors and population with disabilities get more up-to-date, prevenVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
11

tion-oriented, personalized care. In fact, we have brought some of 

these talented people out of retirement. 

We appreciate the additional resources provided by Congress and 

the flexibilities in our hiring process, especially our management 

staff authority. Aided by the direct hiring authority and the Federal Career Internship Program, CMS has hired a total of 345 new 

employees. We are on track to a commitment of about 400 in place 

right now, and we expect close to another 100 beyond that. 

We have also restructured within CMS to improve our ability to 

use these human resources to meet the requirements of the Medicare law. Using our new hires and our updated agency structure 

and business processes, we have worked to develop an effective system for providing reliable access to quality prescription drug plans 

and to Medicare Advantage plans throughout the country. We have 

combined the expertise and experience of our staff with that of the 

experts who have joined the agency, including leaders from the 

Federal Employees Health Benefits Program, pharmacists, or other 

health professionals and benefit managers from the private sector. 

Much like FEHB, we have sought to develop a transparent process 

that provides predictable and sensible oversight. And we have augmented our own capabilities by listening carefully to ideas and perspectives from many diverse outside groups through an extensive 

public comment process about our regulations and guidances and 

application materials and other support documents. 

For example, as part of our work with the potential prescription 

drug plan and Medicare Advantage sponsors, we held four conferences around the country. Sponsors found the opportunity to 

meet with our leadership and our subject area experts extremely 

valuable. March 23, as you mentioned, was the deadline for sponsors to submit applications to participate in the program in 2006, 

and we are holding a similar conference in Baltimore today to 

make sure that we are very clear about the requirements for the 

final bids that are due on June 6. 

I am pleased to say that we have seen a very strong response 

from organizations interested in participating in the Medicare Advantage and prescription drug plan programs, clear evidence that 

our new hires and our restructuring are getting the job done. 

Based on the high interest level, CMS is confident that throughout 

the country beneficiaries will have access to prescription drug plans 

on schedule on January 1, and we do not think we will need the 

so-called fallback provision because all areas of the Nation are on 

track for having sufficient health plans. 

In fact, we have already seen an unprecedented response to our 

implementation of the new Medicare Advantage program in 2005. 

We have received over 130 new Medicare Advantage plan applications this year, including 50 plans completely new to the Medicare 

program and around 80 new preferred provider organizations, 

PPOs. And we have received more than 70 proposals for expanded 

service areas. 

As a result, we are headed for 49 States participating in the 

Medicare Advantage program this year. Based on the applications 

that have come in, we expect well over 90 percent of all Medicare 

beneficiaries to have access to these lower-cost health plans in 

2005, and that is the highest level ever in Medicare’s history. And 

12

it is not just in the big cities anymore. Three-fourths of rural beneficiaries will have access to a Medicare Advantage plan. 

These much improved health plan options are really important 

because they enable beneficiaries to get better benefits and to lower 

their health costs more than ever. Based on the benefits that are 

available now, Medicare beneficiaries can save an average of almost $100 a month when they enroll in a Medicare Advantage plan 

compared to traditional Medicare with its gaps in coverage or to 

buying an individual Medigap plan to fill in these gaps. And with 

our increased use of risk adjustment that targets additional payments to Medicare Advantage to beneficiaries with chronic diseases, there are greater opportunities than ever for beneficiaries 

with chronic illnesses to save through the comprehensive benefits 

and better coordination of their care. In fact, more than 40 plans 

are offering special needs programs, that is, programs specifically 

targeted to our beneficiaries who are frail and have multiple illnesses, this year, and we expect well over 100 special needs plans 

next year. 

But we know that providing up-to-date benefits is not enough to 

lower health care costs and improve health for our seniors. For this 

reason, we are developing and implementing a comprehensive education and outreach campaign, including unprecedented collaboration with other government and private organizations, to support 

our beneficiaries in getting help with Medicare’s new coverage. 

The three phases of this education campaign focus first on 

awareness and the sources of help; second, on education to make 

an informed choice; and, third, on targeting those who have not 

made a choice yet, to help them understand the benefits of the program later in 2006. 

Our central office and our ten regional offices are working with 

the Social Security Administration, the Administration on Aging, 

with other Federal agencies, with States, with State Health Insurance Assistance Programs (SHIPs), plans like the one you mentioned, with employers, unions, national and community-based organizations, and private organizations to educate beneficiaries and 

their caregivers and others at a grass-roots level to give them the 

support they need to make an informed choice. So, Senator Carper, 

that is very important, as you said. 

And, of course, we appreciate the support of Members of Congress, like all of you, to help educate beneficiaries about how they 

can get this help to lower their medical costs. Groups like OSHIIP 

in Ohio and the Access to Benefits Coalition and you, Mr. Chairman, have been very important assets for seniors, and it has been 

extremely helpful in getting us moving in the right direction for implementing the law effectively. 

We are working hard at CMS, and we have made a tremendous 

effort to move toward full implementation of the new benefits created under the Medicare law on schedule. So, again, I want to 

thank you for the opportunity to update you on our progress in implementing the Medicare prescription drug coverage and for your 

support in making sure we have the strongest possible organization 

to take advantage of the tremendous opportunities provided by the 

Medicare law. I want to thank all the Members of this Subcommittee who may want to add to the Medicare benefit legislaVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
13

tively and bring in even more coverage, but who are also working 

with us constructively to make sure that we are using the Medicare 

law that we have now to get the most help to seniors. 

Thank you very much, and I would be happy to answer any questions you all may have. 

Senator VOINOVICH. Thank you, Dr. McClellan. 

All of us are interested in having our people take advantage of 

the program. I know in my State we have 650,000 people that are 

at or below 150 percent of poverty. Many of those people today, 

most of them, have no drug coverage. This new plan will provide 

them with drug coverage. For a generic drug they will pay $3. For 

a name brand drug it will be $5. So it is really important that 

these folks get all the information they need to take advantage of 

this wonderful benefit that is being made available to them. 

A new Congressional Research report on beneficiary information 

concluded about the program, the temporary card, ‘‘The outreach 

and education experience of the discount card program can offer 

lessons for implementing the Medicare prescription drug benefit beginning in 2006. Then decisions beneficiaries must make are likely 

to be more complex and the stakes higher for not enrolling or selecting a prescription drug plan that does not target an individual’s 

needs as well as alternative plans.’’

What I would like to know is what lessons have you learned thus 

far in implementing the card, the temporary card, that are going 

to accrue to the benefit of fully implementing this program. 

Dr. MCCLELLAN. Mr. Chairman, as you know, the Medicare discount drug card program was a temporary program that we implemented quickly to provide help to seniors who were paying the 

highest prices for their medicines, and especially seniors who were 

having to choose between drugs and other basic necessities. That 

drug card, as you mentioned, is now providing assistance to almost 

6.5 million beneficiaries. Those millions of beneficiaries are getting 

billions of dollars in drug savings. 

Let me talk about two types of lessons we have learned. One is 

on the operational side, and the other is on the outreach and educational side. 

On the operational side, we found some challenges when drug 

discount providers had only a limited amount of time to get an application together and get it in to us. So with the drug benefit we 

are taking advantage of the additional time we have. It is not a lot 

of time, but it is more than we had to implement the drug card, 

to have some discussions between the potential drug plan sponsors 

and the Medicare program. We have modeled this on the way the 

Federal Employees Health Benefits Program successfully does business. We have an exchange of information to help make sure that 

we have answered questions and overcome obstacles with the drug 

plans being developed, that they meet all of our standards and that 

they do so in a way that provides the best deal for beneficiaries. 

That is paying off with the tremendous response that we have seen 

for participating in the drug benefit next year. 

The next part is on outreach, and we have seen that direct interactions with beneficiaries over a prolonged time period can really 

help in informing them about new benefits. This is not just a new 

finding with the drug card. We have known for every low-income 

14

assistance provision that the Department of Health and Human 

Services ever implemented, as well as other changes in Medicare 

benefits. The more we give seniors and our beneficiaries clear and 

simple information and the earlier we can start, the better. 

We have taken several steps to do just that. For example, we 

have worked with the Social Security Administration to develop 

and finalize a low-income subsidy eligibility application, which is 

being field-tested right now, and in the next month or so will be 

sent out nationally to everyone who may be eligible for the low-income subsidy. That gives us even more time to get low-income 

beneficiaries enrolled. Previous low-income assistance programs 

often took a decade to get up to 50 percent participation, we are 

going to try and overcome that by using simpler forms, by getting 

them out earlier, and by relying on much more extensive grassroots support. 

Senator VOINOVICH. Are the number of plans going to be less 

than the number of cards available under the old program? The 

problem is that so many seniors just had too many options available and it made it very difficult for them. In addition to that, 

many of them are not computer literate. Maybe 15 years from now 

it will be fine, but the fact is they are not computer literate. Have 

you done anything to try and reduce the number of options that 

these individuals will have available to them? 

Dr. MCCLELLAN. Senator, we do not know exactly how many 

drug plans are going to be available. I am confident that we are 

going to have a significant availability of drug coverage in every 

area of the country. I don’t think it is going to be anything like the 

overall numbers with the drug card. But we have also learned——

Senator VOINOVICH. Well, are you going to put people into a program? If you recall, at the end, because we were very upset because 

so many low-income people were not taking advantage of it, you 

identified people that were eligible and sent them the information. 

At that stage of the game they were in a program, and then if they 

did not want to, they could opt out of it. 

Dr. MCCLELLAN. Right. We are going to get our identifiable lowincome beneficiaries into drug coverage. So for the dual-eligible 

beneficiaries, people who are in Medicaid drug coverage now and 

are going to transition to Medicare drug coverage in January, we 

are working with the States to identify all dually-eligible beneficiaries early. Additionally, we are working to ensure they are notified in early October about the plan that they will be assigned to 

in January, if they do not make a choice on their own. That gives 

them, their caregivers, their institution, if they are in a facility, 

and their health plan 3 months to prepare for their transition. 

They can also switch month to month. 

In addition, for other low-income beneficiaries, as long as we can 

identify them, we are going to make sure they get drug coverage 

by the end of the open enrollment period. The key is getting that 

low-income subsidy application filled out. For people who we have 

identified because they are in one of the limited Medicaid benefit 

programs, the so-called Medicare saving programs, like SLIMB and 

QMB, we will work with the States to identify those people, enroll 

them automatically in the low-income subsidy, and get them into 

drug coverage. 

15

But the other group that we want to reach are those low-income 

seniors that you mentioned, Senator, who are not getting any help 

with their drugs or other medical costs. In many cases, we have 

been able to get them signed up for the drug card and the $600 

in assistance and the wrap-around subsidies. Those people we do 

need to get enrolled in the low-income subsidy so that they can 

then be subsequently enrolled in the drug card if they do not make 

a choice on their own. 

So, yes, we are planning on enrolling many of these beneficiaries 

automatically in the drug benefit, and that is why we are starting 

this process so early this time. This is something that we learned 

from the drug card experience, that we want to take advantage of 

all the time we have because these populations can be very challenging to reach. 

Senator VOINOVICH. Thank you. Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Dr. McClellan, there are approximately 60,000 dual-eligible HIV/

AIDS patients along with 6 million other dual-eligible beneficiaries 

in the United States. The final regulations have no grandfather 

clause covering drugs that dual-eligibles have been stabilized on 

under Medicaid. The question is: How will CMS avoid forcing beneficiaries to change their medications if the drug plans do not provide the same coverage as Medicaid? 

Dr. MCCLELLAN. Senator, the first thing we are going to do is 

require the drug plans to provide beneficiaries access to all medically necessary treatments. And we have worked extensively with 

advocacy groups for our vulnerable Medicaid beneficiaries who 

often have illnesses that requires them to depend on particular 

medicines for AIDS, for mental illnesses, and for other sensitive 

and complex conditions. 

As a result, we issued not only this regulatory requirement for 

access to medically necessary treatment, but we have backed it up 

with further regulatory guidances. Let me give you an example of 

a couple of those. 

One of those is our guidance on formulary coverage for the drug 

benefit, and the formulary coverage is very explicit about——

Senator VOINOVICH. Dr. McClellan, you keep using the word ‘‘formulary.’’ Could you explain what a formulary is, please? 

Dr. MCCLELLAN. A formulary, Mr. Chairman, is a list of drugs 

that are covered under a particular drug plan, those drugs get the 

most favorable subsidies from the drug plan and can be obtained 

at the lowest cost by the beneficiaries in the plan. Drug plans are 

also required to have an exceptions and appeals process for access 

to off-formulary drugs that are medically necessary. And we have 

tried to make that process quicker, faster and simpler as a result 

of the regulations and the input that we have received. But the 

main goal is to have a smooth process for people to get access to 

the drugs that they need within their drug benefit, and that is why 

in our formulary guidance, we explicitly said that HIV and AIDS 

drugs, and other important types of drugs, must be adequately covered. In particular, for the HIV and AIDS drugs, we said that substantially all or all must be covered. That is the test in our CMS 

formulary review. And we are further requiring that the coverage 

16

reflect the kind of coverage that is widely available in some of the 

best private plans and Medicaid plans today. 

So, for example, the most popular plans in the Federal Employees Health Benefits Program cover typically, on formulary, 25 or 

more HIV/AIDS drugs because the beneficiaries need access to 

those particular drugs because of the complexity of their disease. 

And we are going to require the same kind of oversight for the 

drugs offered in the Medicare program. 

Second, when there are requirements for a drug transition—and 

I think these are more likely to be when you transition, for example, one cholesterol-lowering drug to another. Beneficiaries can get 

much lower prices when you can negotiate and get people switched 

to another drug that meets their needs as effectively. The plans 

must also meet well-established best practices for any medication 

transitions. That often involves giving a patient more time on a 

particular medicine as well as making sure that the medicine that 

is the subject of the transition is likely to meet the beneficiary’s 

needs. If the beneficiary has already tried a drug and it has not 

worked, we are not going to make him go back to that. 

So there is formulary guidance, there is transition guidance, and 

there is our regulatory oversight to require plans provide access to 

needed drugs. And we are relying on the best practices of existing 

drug plans to do that. 

Senator AKAKA. Thank you for your response. My time is almost 

up. I hope we have another round, Mr. Chairman. Thank you. 

Senator VOINOVICH. Senator Levin. 

Senator LEVIN. Thank you, Mr. Chairman. Thank you again, Dr. 

McClellan. I want to talk about the statement that you made that 

you expect that in all of the regions there will be at least two private plans that will be offered to beneficiaries and, therefore, there 

will be no fallback triggered, so that there will not be provisions 

by Medicare itself or the offer of a plan by Medicare itself. That 

means that you are budgeting next year, I assume, for no costs for 

that fallback. Is that correct? 

Dr. MCCLELLAN. Well, that is correct, but we are planning for all 

contingencies, and what I can tell you now is that based on the response that we have seen, if we are able to stay on the track that 

we are on now, we will get those drug plans available everywhere, 

and we will not need the fallback. 

Senator LEVIN. And I take it that is your goal. 

Dr. MCCLELLAN. Absolutely, and I think we are on track to 

achieve that goal. 

Senator LEVIN. So the goal is not to trigger a fallback. 

Dr. MCCLELLAN. Well, the goal is to trigger access to up-to-date 

coverage for all of our beneficiaries in all areas. 

Senator LEVIN. With private plans? 

Dr. MCCLELLAN. And it looks like the health plans are going to 

be able to deliver that coverage everywhere. 

Senator LEVIN. Is the goal to have private plans deliver that type 

of prescription drug benefit? 

Dr. MCCLELLAN. The main goal, Senator, is to get drug costs 

down for seniors right away and to make sure that their coverage 

does not fall behind again, like it has over the last several decades. 

And the health plans are going to enable us to do that. 

17

Senator LEVIN. All right. Now, what are the ways in which you 

will try to avoid the cherrypicking problem? Since the premium 

and the co-pay is within the discretion of the company, the private 

company—there is no limit on those and, therefore, they can have 

a very high co-pay and cherrypick healthier seniors mainly through 

using a high co-pay. How are you going to be sure that there are 

not only two plans or more in each region but that at least one of 

those plans is an affordable plan for people who are sicker? 

Dr. MCCLELLAN. Well, Senator, our main focus is on making sure 

all of our beneficiaries have access to the drugs they need, and I 

have already talked about some of the regulatory requirements 

that we are imposing to make sure that plans provide access to 

coverage. 

Now, I talked about the formulary requirements a minute ago, 

and I want to make clear that our oversight and our regulatory 

guidances apply to other tools used by the drug plans, like how 

they structure their co-pays and which drugs are preferred drugs 

on their formularies. And we will be enforcing the rules to make 

sure that there is not discrimination against any particular type of 

beneficiary. 

Once again, there are good examples of how you can do this from 

the private sector, and we will be looking to make sure that those 

kind of co-pay structures are used to prevent discrimination 

against any type of our beneficiary. 

Beyond that, there are actuarial requirements that the drug 

plans have to meet. They cannot require high co-pays on every 

drug. They must meet the actuarial standards in the law for a 75-

percent subsidy between drug spending at $250 and $2,250 where 

most seniors have much of their drug spending. They must all provide catastrophic coverage for beneficiaries who have high out-ofpocket costs. And they must provide comprehensive benefits to lowincome seniors. 

So through all of those steps—our regulatory oversight, our requirements that the plans meet the strong benefit intended by the 

law—we are going to make sure that the plans do not discriminate 

against any type of beneficiary. 

Senator LEVIN. The co-pay, though, is left up to the private company. 

Dr. MCCLELLAN. Within our oversight. They can, just like they 

do now in mainstream health insurance plans, in retiree plans, like 

for your automakers in the Detroit area, have tiers and have preferred drugs and non-preferred drugs. The requirement, though, is 

that they cannot discriminate against any types of beneficiaries in 

the process. We will be comparing the co-pay structure and the 

other tools used by the drug plans to widely used best practices 

and retirees plans and the Medicaid plans to make sure that does 

not happen. 

Senator LEVIN. And those regulations have been written? 

Dr. MCCLELLAN. The regulations have been written, and not just 

the regulations but we have issued specific guidances on our formulary oversight, on our oversight of co-pays and other tools used 

to manage drug costs, on drug transitions. You name it. We are 

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ceived from a lot of groups who are very concerned about making 

sure we address this problem effectively. 

Senator LEVIN. I am less optimistic than you are about avoiding 

the cherrypicking problem, but you are telling us that you then are 

designing your regulations and you will predict for us that problem 

will be addressed and that there will not be cherrypicking so that 

all seniors across the level of fragility will be participating, not just 

being offered plans. 

Dr. MCCLELLAN. The intent of the regulations——

Senator LEVIN. If the plans are not affordable for everybody, you 

are saying that it is your goal—and you predict you will achieve 

this goal—that seniors of different levels of sickness will participate in these plans. Is that what you are telling us? 

Dr. MCCLELLAN. That is right, and we think the plans are going 

to be particularly attractive to beneficiaries with chronic illnesses 

where using these drugs can help them avoid other medical complications and costs. So we will be implementing our regulations, 

we are applying our regulatory guidance now to applications that 

have come in to make sure that they reflect, again, widely used 

best practices in formularies and drug benefit management. 

Senator LEVIN. I understand. If I could conclude this, Mr. Chairman, with just one more question. 

What percentage of seniors do you predict will participate in 

these plans that will be offered now in every region by the private 

sector? You said you believe that there will be at least two or more 

offered in every region. What percentage do you believe will participate? Do you have an estimate of that? 

Dr. MCCLELLAN. Well, there are actuarial estimates out from the 

Congressional Budget Office, from our own independent actuaries, 

and other sources, and those have projections of very high participation levels. 

Senator LEVIN. Give us the percentage that you are predicting. 

Dr. MCCLELLAN. I think their participation rates are close to 90 

percent, something in that range. I think Senator Carper mentioned the issue of how you think about launching a new product, 

and this is something that is new. It is new for Medicare. It is new 

for seniors. And it is a topic that is complicated and that seniors 

are going to have to spend a little time understanding because it 

is so important for their health. 

What I think that means is that we are not going to see dramatic 

sign-ups overnight, that over time, by letting seniors know what is 

coming, by making them aware of the details in ways that are very 

relevant and understandable to them this fall, by seeing what their 

experience is in the first months of the program, we will see more 

and more sign-ups. We are definitely expecting tens of millions of 

seniors to enroll in this program, to get help. No matter how they 

get their drug coverage now—through retirement benefits, through 

State-sponsored plans, through Medicare Advantage plans—we are 

expecting tens of millions to enroll, and that is the big focus, on 

making sure that those beneficiaries are informed about their opportunities to save next year. 

Senator LEVIN. Thank you. Thank you, Mr. Chairman. 

Senator VOINOVICH. Senator Carper. 

19

Senator CARPER. Speaking of product launches, yesterday was 

the launch of the baseball season, and Senator Levin and I are big 

Detroit Tigers fans, and we got out of the starting gate in pretty 

good fashion yesterday, 11–2. 

Senator LEVIN. We are in first place. 

Senator CARPER. First place. This is the team that, I think, 2 

years ago was second to the New York Mets, was the all-time losing baseball team in America. This year we are going to vie with 

the Cleveland Indians for the Central Division crown in the American League. So we will see how those Indians came out of the 

starting gate yesterday as well. 

I have two questions, Dr. McClellan. I want to go back on one 

of them to something that Senator Voinovich raised a minute ago, 

I think. And just take a minute and just talk with us again. How 

does CMS plan to ensure that, to the best of the ability of the 

States, they identify all the dual-eligibles? How can you help them 

do that? It is a tall order. 

Dr. MCCLELLAN. This is a very important issue. We want to 

make sure that there is a smooth transition, and the way to do 

that is to ensure that it does not happen between December 31 and 

January 1 but, rather, it begins early and it has a smooth process 

to get beneficiaries in the new plan in January. There are many 

facets to this, and in the limited time I am just going to give you 

a few examples. 

One is that we are working with States right now to make sure 

that we have all of their dual-eligible beneficiaries identified. 

States are sending us lists of those beneficiaries now, and we are 

preparing to start contacting them and their caregivers about the 

changes that are coming. 

Second, by early October we are going to let them know what 

plans are available in their areas that they will be able to choose 

for free and that they will be able to get access to for no premiums, 

no gaps in coverage, and, as Senator Voinovich said, just a few dollars in co-pays, we are going to assign them to a plan if they do 

not choose one on their own by January 1. We are going to do that 

by early October so that the plan, working with the beneficiary and 

the beneficiary’s caregivers, can start planning for a smooth transition. 

Beneficiaries who are dual-eligibles can change anytime. They do 

not have to stick with the plan that we assign them to. They can 

go to a different one that is available in their area. In fact, even 

after the benefit starts, they can change month to month if there 

is a benefit that they think would be a better fit for their personal 

needs. 

In addition, we have developed a guidance for the transition of 

beneficiaries in Medicaid programs, and we are working with the 

States and the health plans to make sure that they follow that 

guidance. The guidance focuses on issues like medication transitions to make sure that if there are any medication transitions they 

are handled appropriately, combined with our guidance on access 

to medically necessary treatments. We think many of the beneficiaries are going to be able to continue the drugs that they are 

on, especially since many of these formularies are going to be pretty broad and the co-pays for these dual-eligible beneficiaries are 

20

very low, just a few dollars. So those are some of the steps that we 

are taking. 

Another step involves using electronic health systems to help 

support this effort. We are planning for the contingency that, in 

spite of all of the effort we undertake, there are going to be people 

who are on Medicaid who show up at their pharmacy in early January and say, ‘‘I want a refill,’’ and are not going to know any of 

these specific details. We are implementing an electronic coordination of benefits system so that a pharmacist sitting right there at 

the counter, as long as this person knows their name and their 

date of birth, just some basic information, they will be able to tell 

that individual what plan they are in, what their coverage is, and 

get those prescriptions filled appropriately. 

Finally, there are steps that States can take to help make the 

transition work better. For example, we have notified States that, 

at their option, if they want, they can fill 3-month prescriptions in 

December that would effectively extend the transition period 

through March, and they will get the full Federal match for those 

provisions. Senator Rockefeller has talked about legislation along 

these lines, and we can do 3 months administratively at State option. 

We are having specific contacts with States about this. We have 

a major conference sponsored by the National Governors’ Association coming up later this month in Chicago to go over the specific 

transition issues, and we are going to have a specific team in place 

with each State to make sure that they are keeping up with the 

checklists of the things that need to be done for a smooth transition. 

Senator CARPER. But other than that. 

Dr. MCCLELLAN. We are trying to keep busy. 

Senator CARPER. Good enough. My second question deals with 

the number of personnel, the kind of resources, personnel resources 

you are able to apply to, I guess, reviewing all the plans that are 

being proposed. I understand as many as a couple thousand are 

going to be submitted. I have heard that you may have as few as 

10 full-time personnel to actually review all of those and I think 

over maybe a month-and-a-half period, which is not much time and 

is a lot of work in order to do it well. 

First of all, is there any basis to what I have heard? 

Dr. MCCLELLAN. Well, I do not know about the couple of thousand plans. We have received a lot of applications, but I think that 

number is on the high side. And that gets back to the earlier point 

about the importance of having time to do this effectively. We have 

divided the process of getting the bids in and getting the plans provided into several steps. We had early notices of intent with the 

plans back in February. That led to some preliminary discussions 

to make sure that the plans knew exactly what we were expecting 

in terms of applications. We had an application deadline on March 

23, which included a lot of the details about formularies and where 

the service areas are going to be. And then the final bids are due 

in June. 

What we have effectively done is have this multiple-step process 

so that we can spread out the work, deal with issues earlier, and 

make sure that we can provide some close oversight and coordinaVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00024 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
21

tion with the plans so that they are meeting our objectives and our 

requirements for offering a Medicare drug benefit. At the same 

time not only does the plan have a clear idea about what to expect, 

we have a smoother workload flow in process. This is the way the 

FEHB has done business successfully for many years, back and 

forth a dialogue at each step in the process. 

Beyond that, we have a team of individuals assigned to reviewing 

each and every application. It is not 10 people versus 2,000. We 

have a lot more staff at CMS that are meeting this workload, and 

we have been tracking this very closely. We have a very clear idea 

about the maximum number of bids that we are going to receive 

because we have all the applications in now. The staff is meeting 

the workload burden of reviewing the applications, and we are 

planning ahead for the actuarial, technical, and other reviews that 

are going to go along with the final bids when they come in. 

Senator CARPER. Any idea how many applications you have received? 

Dr. MCCLELLAN. I do not have an exact number now. The deadline was just a week and a half ago, and I want to divide the applications into those that look complete and serious and likely to meet 

all of our requirements and those that may not be so promising. 

But we will try to get you the numbers on that as soon as we can. 

Senator CARPER. All right. And in closing, I would just ask that 

you keep in mind, whether it is 2,000 or 1,500, whatever, that is 

a lot, and to make sure that you have the adequate resources to 

vet it well. Thank you. 

Dr. MCCLELLAN. I appreciate that. Thank you, Senator. 

Senator VOINOVICH. You talked about the Advantage plans. 

Could you explain what those plans are. I assume it is something 

like an HMO where somebody would sign up and that HMO would 

be given X number of dollars and they would provide services, ordinary Medicare services, and now they would have an additional 

drug benefit. How would that work? And would they help the individual that was in that Advantage plan to make the right decision 

in terms of the drugs that they should be—the plan that they 

should go into or will they have a plan of their own? How does that 

work? 

Dr. MCCLELLAN. That is right. In general, Senator, the Medicare 

Advantage plans have their own drug benefit as part of the plan, 

and that is part of the advantage of coordinated care. We are expecting a lot of the Medicare Advantage plans to offer more generous drug benefits beyond just the basic Medicare statutory 

requirement. The reason for that is that through care coordination 

they can keep their overall costs down and provide more benefits 

to seniors. That already happens now. Many Medicare Advantage 

plans—most of them—are providing some limited drug coverage, 

and now with the new drug subsidy in 2006, they will be providing 

much more. 

They found that providing effective drug coverage and giving people affordable access to medicines helps them keep costs down in 

other areas. It helps them keep their patients with heart failure 

out of the emergency room. It helps them keep their patients with 

diabetes from experiencing complications that lead to surgery and 

circulatory problems and the like. 

22

We are also reinforcing this aspect of care coordination by increasingly targeting the money that goes to Medicare Advantage 

plans to the plans that are taking care of beneficiaries with chronic 

illnesses. We are doing this through risk adjustment. We are going 

to 100-percent risk adjust our payments to the plans. That means 

that if you are a coordinated care plan, you have to attract chronically ill beneficiaries and serve them well in order to make 

any——

Senator VOINOVICH. How many Medicare-eligible people in this 

country are in Advantage plans, what percentage? 

Dr. MCCLELLAN. We are over 5 million enrollees now, and this 

has been increasing by 50,000-plus a month in recent months. So 

that is about 14 percent, and it is growing substantially because 

these plans are offering better benefits and lower costs and they 

are more widely available in Medicare than ever before. And this 

is not just HMOs. That is historically the main kind of coordinated 

care plan in——

Senator VOINOVICH. In other words, if I am an individual out 

there and I am on Medicare and I do fee-for-service, I go to see a 

doctor and I have something wrong with me and they get reimbursed for it, under ordinary circumstances what I would do is I 

would sign up for Part D separately from that. 

Dr. MCCLELLAN. Separately from that. 

Senator VOINOVICH. So then I would have my A, B, and D. 

Dr. MCCLELLAN. That is right. 

Senator VOINOVICH. Right, or I would have the alternative to 

check around in my community to find out if there is an Advantage 

plan where I could enter into that plan, they would get the money 

from CMS, and they would then take care of looking after me in 

terms of my health care and my prescription drug needs. 

Dr. MCCLELLAN. That is right, and they would have a comprehensive set of benefits, and they increasingly cover services beyond the minimum that Medicare offers. So, for example, AltCare 

is a good example of a coordinated care plan in Ohio that is run 

by doctors and that focuses on taking this holistic approach to 

keeping a patient healthy. They do not think about doctor visits 

separately from drugs, or separately from hospitalizations. They 

think about the patient. How do you help a patient with heart failure, diabetes, or asthma, or another chronic disease stay well and 

get the most out of their health care? By combining this new drug 

coverage with the other coordinated services they provide, including wellness services, or visiting patients in the home when they 

need help in managing their medications, they can take a lot of 

steps to keep overall costs down and, most importantly, to keep patients with chronic illnesses healthy. 

Senator VOINOVICH. Thank you. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

Dr. McClellan, I understand that soon seniors will be asked to 

select a drug plan. CMS will be responsible for counseling and outreach for seniors and vulnerable populations, such as individuals 

suffering from mental illness. 

As you know, the MMA required GAO to examine the accuracy 

and consistency of answers provided through the Medicare toll-free 

help line that is supposed to provide answers to questions about 

23

program eligibility, enrollment, and benefits. Unfortunately, GAO’s 

findings were not encouraging. Accurate answers were provided 

only 61 percent of the time, inaccurate answers were provided 29 

percent of the time, and no answer was provided for the remaining 

10 percent. 

Given these results, what assurances can you provide this Subcommittee that CMS outreach efforts on implementation of the regulations will be more effective? 

Dr. MCCLELLAN. Well, let me answer that in two parts. First, we 

want to make sure that accurate information is available through 

our 1–800–MEDICARE number. 

Second, 1–800–MEDICARE is only one of a number of sources 

that are going to be available for seniors starting now and throughout the year to help them learn about and get the most help from 

the drug benefit. 

On 1–800–MEDICARE, that GAO survey asked a set of hypothetical questions that are not necessarily what our customer service representatives actually are faced with when beneficiaries call 

in every day. We have an ongoing independent review process that 

checks how accurate the information actually provided by our customer service reps are on the calls that come in. 

We have been monitoring that very closely, on an ongoing basis. 

We review a sample of all of the calls in every single month, not 

just a one-time asking of hypothetical questions. And I am very 

pleased that we are maintaining accuracy rates—meaning the beneficiary was satisfied with the answer, the answer was independently reviewed and found to be accurate—well over 90 percent of 

the time. We have a quality control process built in for when the 

answers are not complete and are not accurate and are not given 

in a timely fashion to make sure that is the case. 

There are several other reasons for the GAO’s findings that we 

pointed out in our response, when you actually interpret it properly, and get the numbers up and in line with what we are seeing 

in these ongoing independent evaluations of 1–800–MEDICARE. 

This is very important to get right. 

Third, as you mentioned, we need to make sure that we are 

doing actual outreach at the grass-roots level to a lot of beneficiaries who may not be able to call in or may not be able to use 

a computer. I was at an event in Philadelphia at a senior center 

recently where they are organizing grass-roots outreach teams that 

are using the Internet but in support of beneficiaries—they are not 

counting on the beneficiaries to use them directly—to get them informed and then signed up for benefits this year, and I had not 

one, not two, but three translators at that event. They are focusing 

specifically on their beneficiary populations that do have language 

barriers or do have cognitive impairments, just as they provide assistance now with helping those beneficiaries get access to the coverage they are eligible for in Medicaid and helping them manage 

their health costs. 

So those grass-roots efforts are very important in addition to 

making sure we have effective 1–800–MEDICARE answers. 

Senator AKAKA. Thank you for that response, Dr. McClellan. 

In recent testimony before the Senate Committee on Finance, the 

HHS Inspector General nominee, Daniel Levinson, testified that 

24

prescription drugs are especially vulnerable to fraud, waste, and 

abuse. And he said, ‘‘It is therefore essential that the CMS build 

a sound infrastructure for program implementation with strong internal controls, adequate data collection to enable proper oversight, 

and sound financial management systems.’’

How has CMS addressed these concerns? 

Dr. MCCLELLAN. Well, I agree completely with Mr. Levinson’s 

statement. He is a man of great integrity who is watching closely 

what we are doing in this area and has had great advice for us. 

I hope he gets confirmed by the Senate soon. 

Here is another case where we have learned a lesson from the 

drug card. With the drug card, early on we contracted with a program integrity organization that has helped us with monitoring the 

financial transactions with the drug card, with making sure there 

was not any bait-and-switch, and keeping a close eye out for exactly the kinds of things that you are worried about. We made that 

announcement, instituted it in April, 2 months before the drug card 

started, and we have been monitoring the drug card very closely. 

We have seen no systematic evidence of any fraud or abuse or even 

misleading statements by cards, and we have been right on top of 

any minor violations to get them corrected and to help the program 

keep working smoothly. 

We are going to do the same thing with the drug benefit. We will 

have program integrity oversight in place, we have special contractors that are making sure that the money is used appropriately, 

and that the subsidies are spent on their intended purposes of 

helping seniors get access to affordable medicines. We will be 

watching that very closely with a lot of help and a lot of tight oversight from the Office of the Inspector General. 

This is a very important area for making sure that we continue 

to have a high level of program integrity. We have also requested 

additional funds in our fiscal year 2006 budget to help us meet 

these new responsibilities, which we take very seriously. 

Senator AKAKA. Thank you. Thank you, Mr. Chairman. 

Senator VOINOVICH. Senator Levin. 

Senator LEVIN. Thank you, Mr. Chairman. 

The Act that we are talking about contained tax subsidies to encourage employers who keep their retirees covered with prescription drug coverage. The threshold which was used by the bill is 

called ‘‘credible prescription drug coverage,’’ so that if a company 

maintains that credible prescription drug coverage they will then 

get a tax subsidy for doing so. 

Has the criteria for what is credible been set forth already in the 

regulations? 

Dr. MCCLELLAN. Yes, sir, it has. 

Senator LEVIN. OK. And who makes the decision as to whether 

a particular company meets that criteria? Will that be a Medicare 

decision, an IRS decision, or a combination? 

Dr. MCCLELLAN. It will be a Medicare decision done by our independent actuaries. It is an actuarial test that the coverage is of 

high quality and that the money we are providing in the subsidy 

is going to the beneficiaries to support their coverage. 

Senator LEVIN. Now, when we were debating the bill, the Budget 

Office estimated that once it was fully implemented by CMS that 

25

as many as 25 percent of retirees with existing prescription drug 

coverage would still lose the coverage despite those subsidies. According to one estimate, that would be about 2.5 million retirees 

who now have good coverage from their former employer who 

would lose that coverage or have it significantly reduced. 

Do you agree with that estimate, first of all? 

Dr. MCCLELLAN. No, and this is a good example of why the interaction in our process of developing the regulations and issuing 

guidances is so important. We have developed a number of steps 

that employers can take to continue and enhance their drug coverage, and there are lots of ways to do it. The bottom line is that 

we want to make sure beneficiaries are better off. From what we 

are seeing in recent surveys, about 90 percent plus of employers 

are planning to continue their coverage in one way or another, and 

continue their support for beneficiaries. There are a lot of ways 

they can do it, not just with this employer subsidy. And I can talk 

about that if you are interested. 

Senator LEVIN. This is for retirees, we are talking about. 

Dr. MCCLELLAN. This is for retirees that we are talking about, 

and then there are some retirees who are just in access-only plans. 

It is not like the Big Three automakers. This is where the retirees 

are paying for all their coverage on their own. Those retirees may 

well be substantially better off in the new highly subsidized Medicare drug coverage. So we are not expecting that kind of drop rate 

at all. 

Senator LEVIN. What is the drop rate you are predicting? 

Dr. MCCLELLAN. Well, in our final regulation we talked about approximately 90 percent of beneficiaries having coverage either 

through continuing the current coverage with the retiree subsidy or 

through the employer doing what is called a wrap-around. They get 

the basic Part D benefit, and then they fill in gaps, just like many 

employers do with retirement benefits. We pointed out that, right 

now, this other small group of beneficiaries is not getting help from 

their employer. So they are going to be better off, and they are 

going to get lot bigger subsidies in Part D, which is subsidized coverage, than they would from any unsubsidized employer coverage. 

But we are expecting, from what we are hearing and what all the 

surveys of businesses are showing, that the vast majority of employers are going to take advantage of the new help from Medicare 

to continue or to improve their coverage. 

Senator LEVIN. So is your prediction that 90 percent of employers 

essentially will maintain their coverage or better for their current 

retiree——

Dr. MCCLELLAN. Or they will—through one mechanism or another. They can either use the retiree subsidy or they can wrap 

around the basic benefit. In working with States like Michigan, 

they may be better off financially doing a wrap-around. But the 

point is to continue and improve coverage for retirees. 

Senator LEVIN. That leaves somewhere around 10 percent who 

will be worse off? 

Dr. MCCLELLAN. I do not think they will be worse off. 

Senator LEVIN. Will there be anybody worse off? 

Dr. MCCLELLAN. Well, we are obviously trying to minimize that 

number. 

26

Senator LEVIN. I know what your goal is. Are you projecting that 

there will be any retirees who will lose their coverage that they 

now have? 

Dr. MCCLELLAN. We have not been able to do specific projections 

at the level of each and every beneficiaries. 

Senator LEVIN. Just a gross number? 

Dr. MCCLELLAN. What our actuaries projected was that there 

was going to be a substantial increase in the total support for retiree coverage. Now, we have the government working with employers to support the coverage, not just the government alone—not 

just employers alone. 

Senator LEVIN. So your actuaries are not projecting that any retirees are going to be worse off. 

Dr. MCCLELLAN. They have not done detailed specific estimates 

at the level of each and every firm. I can tell you that we are working with small employers, large employers, States, all of them, to 

help make sure they take advantage of the new subsidies to get 

that——

Senator LEVIN. I understand that. You have said that here. But 

that means the glass may be 90 percent full. I am just trying to 

figure out how empty it is. 

Dr. MCCLELLAN. Well, the glass is——

Senator LEVIN. It is OK because I am running out of time and 

you are trying to make sure there are none. But you are not willing 

to tell us that there is a projection as to how many will be worse 

off. 

Dr. MCCLELLAN. Our projection is that the glass is going to get 

a lot fuller. 

Senator LEVIN. A lot fuller, but you are not willing to tell us how 

much fuller. 

Dr. MCCLELLAN. I cannot give you an exact number for each and 

every——

Senator LEVIN. Or an approximate number. 

Dr. MCCLELLAN. I think it is around 90 percent, and the rest, 

they are probably better off. 

Senator LEVIN. You are not going to give us an approximate 

number. That is OK. I just want to ask my last question. I give 

up trying to get the answer to that one. 

When the GAO finds, as it has, that the CMS violated the AntiDeficiency Act by spending appropriated taxpayer dollars on the 

unallowable activity—we are talking here about those commercials—CMS is required by law to file a report relative to that finding of that violation to the President, Congress, and the GAO, even 

if it disagrees with the GAO’s determination. And I don’t doubt 

that you disagree with the GAO determination. At least I would 

not be surprised to hear that you do not agree with it. 

First, are you going to follow it, even though the Justice Department says you do not have to? And, second, are you going to submit 

that report, which has to be required, even if you may not agree 

with the finding of the GAO? This is the area that Senator Lautenberg has been so creative and so determined to explore, not just 

with CMS but with a number of other agencies which have engaged in the same activity. So that is my specific question. It has 

to do with that report. First, are you going to file the report reVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
27

quired by law? Second, are you going to follow the GAO’s recommendation even though the Justice Department says you do not 

need to? 

Dr. MCCLELLAN. Well, Senator, I am going to make sure we fully 

comply with the law and that we are transparent with Congress 

and everyone else in all of these sensitive issues. Now, I am a doctor and not a lawyer, and our main focus is on getting accurate information out to beneficiaries. But we absolutely want to make 

sure that we do that in full compliance with the law. 

As you know, the Department of Justice sets the rules for the 

Executive Branch for interpreting the law, and they do have a disagreement with the GAO on this particular issue. The Department 

of Justice’s Office of Legal Counsel, which has the binding legal authority for the Executive Branch, says that our interpretation of 

the law in this case was appropriate. But, more importantly, I will 

make sure that we comply with the law in providing any information you want. I think the main goal here, which is to get accurate 

information to beneficiaries, is our foremost goal this year as we 

try to inform beneficiaries about the facts of the drug benefit. 

There are a lot of beneficiaries out there who do not have the facts, 

who do not think this benefit applies to them, who do not realize 

that it can help them save half or more of their drug costs. There 

are also low-income beneficiaries who do not realize that there is 

extra help and a comprehensive benefit for them. 

So I want to make sure we are absolutely complying with the law 

and rely on the experts to make sure we do that, at the same time 

we really are focusing on getting accurate information out to beneficiaries. 

Senator LEVIN. For a non-lawyer, you have been very deft. 

Senator VOINOVICH. Senator Lautenberg. 

Senator LAUTENBERG. Thanks, Mr. Chairman. Just a few brief 

things on the news reports. 

Dr. McClellan, I heard what you said very clearly, and I just 

want to confirm it because I thought your statement was very positive in terms of response to what the law requires. I just want to 

draw this out so that everybody is clear on this. 

We have a statement from the Government Accountability Office. 

They say that it is a violation of law. The Administration says they 

do not care. 

Now, you are in charge here. Will you try to eliminate the distributing of these fake news reports? There is a responsible agency 

of government that says they are fake. So now the ball is in your 

hands. Has CMS stopped producing these video releases? 

Dr. MCCLELLAN. I think you are referring to this video news release from a year ago. There has not been another one since then. 

But in terms of the legal authority here, as you know, in the Executive Branch I am bound by the legal interpretations of the Department of Justice, and the Department of Justice and their Office of 

Legal Counsel sees this issue a little bit differently than the Government Accountability Office. 

Regardless of the technical aspects of the legal disagreements 

here, I want to make sure we get accurate information out about 

the drug benefit. We have not had any video news release since the 

one that you are mentioning from over a year ago. 

28

Senator LAUTENBERG. But the declaration of war is already laid 

down there. The Administration is saying they do not care. I am 

not sure that those were the precise words, but that was the precise meaning. Are you prepared here and now to say that you will 

not permit anything in your Department to be prepared that goes 

out that imitates, that portrays a news release when, in fact, it is 

not? 

Dr. MCCLELLAN. There has been a lot of attention around this 

issue over the past year. There have been no new video news releases issued since the one you are talking about from over a year 

ago, at a time when we have been doing an unprecedented amount 

of outreach and providing information to beneficiaries and working 

with other groups that do that. I am going to keep following effective approaches and I am going to make sure that we stay within 

the law in doing it. But the main goal is to make sure that beneficiaries get accurate information. 

Senator LAUTENBERG So you are willing to step up and say that 

your Department, CMS, will absolutely be unwilling to have anything produced with your—that you have knowledge about that 

isn’t factual as we would expect it to be in terms of not using actors, actresses, not using any means of seduction, either compensation or otherwise, to news broadcasters to color the issues? 

Dr. MCCLELLAN. We absolutely want to follow the law, and these 

details happened before I got to the agency a year ago. From what 

I understand, though, the GAO wasn’t issuing a finding relating to 

the accuracy of the information. They just said that they wanted 

a clearer identification that this was a produced news release, 

something that was not attributable to the Federal Government. 

And in two out of the three segments of that release, it was attributed to the Federal Government. They wanted it in that third segment. And, yes we will make sure we follow the law on——

Senator LAUTENBERG. There is a judgment about the accuracy of 

these things. I correct you here. There is a judgment about the accuracy. If the process is bad, does that suggest it is bad because 

those who are producing it want to tell the truth? Or is it bad because people are being given false information? 

Dr. MCCLELLAN. Well, I want to make sure we are getting accurate information to beneficiaries. Over the past year, Medicare has 

developed a lot of materials in close consultation with outside 

groups, including many groups that did not support the Medicare 

law. These materials communicate accurately the basic facts about 

this being a drug benefit available for everyone, that it can provide 

help for everybody with Medicare regardless of how they get it, 

what their drug costs, and that the benefit provides extra help to 

low-income seniors. That is our main goal, and I want to be absolutely in compliance with the law. 

Senator LAUTENBERG. So you are willing to say that your agency 

will not produce or pay for any releases that are sponsored by the 

government other than just the facts and not used for any coloration of the facts? 

Dr. MCCLELLAN. Well, Senator, we are producing an unprecedented amount of information support, working with lots of outside 

organizations to get beneficiaries informed about the drug benefit 

accurately. And I absolutely want to make sure that the informaVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
29

tion is not misleading, and obviously we are going to fully follow 

the law in doing this very important outreach and education effort. 

Senator LAUTENBERG. Following the law as defined by government accountability? 

Dr. MCCLELLAN. Again, the authority on what the law means for 

the Executive Branch is the Department of Justice. The authority 

for the Legislative Branch is the Government Accountability Office. 

They do differ sometimes in their interpretation of specific provisions of the law. In terms of our overall goal, though, of making 

sure beneficiaries have exact information, 99 percent of the time 

they agree, and that is what we are following in our implementation of this law right now. This outreach effort——

Senator LAUTENBERG. OK. So what do you do with the 5 percent 

that they do not agree on? 

Dr. MCCLELLAN. We are bound under the Constitution to follow 

the Executive Branch legal authorities, and if there are further 

issues here, I am sure they can get sorted out. 

Senator LAUTENBERG. If you were running a company, Dr. 

McClellan—and you are a very clever fellow, and I always enjoy 

seeing you——

Dr. MCCLELLAN. Thank you, sir. 

Senator LAUTENBERG [continuing]. And talking to you. If you 

were running a company and the auditor said, look, this accounting 

statement is 95 percent right, and you say, OK, I am going to listen 

to the auditors. Now, if you know it is wrong, you are going to have 

to say it is wrong and that you will not permit it. 

Is the $35 monthly premium the correct figure, or is just an estimate? 

Dr. MCCLELLAN. It is an approximate estimate. Some may be 

lower, some may be higher. If beneficiaries get access to extra coverage because that is what they want, they may pay a little bit 

more for it. But that is the best estimate of the range of premiums. 

Some beneficiaries are going to pay less. That is the advantage of 

having choices that let beneficiaries get the care the beneficiaries 

need. 

Senator LAUTENBERG. The regs are out. Don’t they say $37? 

Dr. MCCLELLAN. It is right around $35 to $37. Again, some plans 

are going to offer lower-cost coverage; some I expect are going to 

offer supplemental benefits at a higher cost, and seniors will be 

able to choose the coverage that is best for them. 

Senator LAUTENBERG. Thank you, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Lautenberg. Senator 

Pryor. 

OPENING STATEMENT OF SENATOR PRYOR 

Senator PRYOR. Thank you, Mr. Chairman. Dr. McClellan, I appreciate your time and your patience with our questions. 

The first question I have relates to the Medicare Modernization 

Act, and specifically, I know that several CMS employees have extensive knowledge of pharmaceutical issues given their experience 

in working with the Medicaid program. To what extent have those 

people been able to apply their Medicaid expertise implementing 

what is going on with the MMA? 

30

Dr. MCCLELLAN. Extensive application, Senator. Just to give you 

an example, Gail Arden, who has been working on Medicaid issues 

for a long time in our Center for Medicaid and State Operations, 

is one of the key coordinators of our outreach and transition issues 

with the State for dual-eligible beneficiaries and also for the State 

pharmaceutical assistance programs. 

You are absolutely right that we have a lot of expertise in the 

agency on Medicaid issues, and this is an agency-wide effort to implement the Medicare drug law effectively. That is the best way to 

make sure that States save money as intended, the best way to 

make sure that we get a smooth transition. So we are absolutely 

relying on their expertise. 

Senator PRYOR. Let me stay with the MMA, if I can. This Subcommittee has jurisdiction over, ‘‘the management, efficiency, effectiveness, and economy of all departments, agencies, and programs 

of the Federal Government, including overlap and duplication of 

Federal programs.’’ Chairman Voinovich has really been a bulldog 

on trying to keep the agencies accountable and trying to make sure 

that Congress exercises its oversight, which we should. One thing 

I noticed with the Medicare Modernization Act is that the MMA 

mandates that Medicare Advantage local programs receive an average of 107 to 109 percent of traditional Medicare payment levels, 

correct? Do you follow me so far? 

Dr. MCCLELLAN. I think you are talking about the GAO estimate 

there. 

Senator PRYOR. Right. 

Dr. MCCLELLAN. Yes, I think the estimate is 107 percent. 

Senator PRYOR. Right. However, experts believe that private 

plans will actually receive about 116 percent of the cost of the same 

patients in traditional Medicare because the plans serve healthier 

than average enrollees. Do you have any comments on that? 

Dr. MCCLELLAN. The trend is getting our payments focused on 

the beneficiaries that have chronic illnesses and have higher costs. 

I was talking earlier about how we are moving towards more risk 

adjustment of our payments to private plans. They are at 50 percent this year; they are going to 75 percent next year and 100 percent in 2007. So we are truly accelerating the focus of targeting the 

payments in Medicare Advantage on the patients who have the 

most to gain from coordinated care, and that is people with chronic 

illnesses. They can use drugs in conjunction with the care they get 

from their doctors, stay out of the hospital to avoid complications, 

and keep their overall costs down. That is why the Medicare Advantage plans are so important. They are saving beneficiaries now 

about $100 a month—$100 a month compared to fee-for-service 

Medicare, and that savings means lower overall health care costs 

but, most importantly, it means lower health care costs for our 

beneficiaries who really need help right now and need to be able 

to take advantage, if they want to, of what care coordination has 

to offer. 

Senator PRYOR. Well, let’s talk about our beneficiaries here for 

just a moment, because I cannot speak for Ohio or other States, but 

I know in Arkansas our Medicaid program currently provides coverage for prescription drugs. I assume most states do, but probably 

not all required it. We do and starting on January 1, Medicaid will 

31

not cover any drug covered by Medicare Part D, and the beneficiary 

must rely on the Federal program exclusively. Many of these beneficiaries, as you can imagine, as you mentioned a moment ago, 

have multiple and many times chronic conditions. 

I am just concerned that there is going to be difficulty in switching to a new formulary overnight. I am concerned there is going to 

be some needed transition—I hate to use the word ‘‘casualties,’’ but 

there are going to be some folks that miss and fall in the gaps because the formularies are not set up the right way. And, I guess 

I am just concerned that you all are trying to provide some guidance on this, but I am not sure that we are going to make sure that 

we get the transition needed, that I think we, in Congress, would 

like to see. Would you like to comment on that? 

Dr. MCCLELLAN. Yes, we would be delighted to work with you 

and your staff to make sure that you are aware of all the steps that 

we are taking to make that transition work smoothly, and that 

means extending it from just December 31 to January 1, early notification of not just the fact that it is coming but which plans people 

would be going into, transition requirements on the prescription 

drug plans for handling Medicaid transitions effectively, as well as 

many other safeguards built into our oversight of the program. We 

are building electronic data systems that make it possible for someone who just walks into a pharmacy to tell the pharmacist their 

name, their date of birth, and they will—even if they did not pay 

any attention to this transition, they will be able to let them know 

which plan they are in and how they can continue to get the drugs 

that they need. 

This is a very important issue. It requires a lot of ongoing close 

work with each and every State, including Arkansas, to make sure 

that people get the full advantage of this comprehensive benefit. 

Medicaid drug coverage, Senator, is an optional benefit. Many 

States have limited their Medicaid coverage to keep costs down. 

The Medicare drug coverage is going to be comprehensive. It is 

going to cost Medicaid beneficiaries at most a few dollars a month, 

and we intend to implement it to get State savings so they can provide even more help for their low-income citizens at the same time. 

This is very important in Arkansas. You have a lot of low-income 

beneficiaries, many of whom do not even qualify for Medicaid now, 

and are getting no help beyond the drug card in the transitional 

system with their drug costs. And so we would very much like to 

work closely with you to make sure we get all of those people or 

as many as possible into effective coverage, and that includes a 

smooth transition. 

Senator PRYOR. Thank you, Mr. Chairman. 

Senator VOINOVICH. Doctor, you have done a wonderful job today. 

Dr. MCCLELLAN. Thank you. 

Senator VOINOVICH. You have been on the grill here for quite 

some time, but you have really gone into a lot of areas where I am 

sure that Members of the Subcommittee wanted information, and 

I am sure that anyone that is having an opportunity to watch us 

on C–SPAN will be much better informed about this wonderful program. 

I just want you to know that as Chairman of this Subcommittee, 

if there is anything that we can do to be of help to you, if there 

32

1The prepared statement of Ms. Marsh with attachments appears in the Appendix on page 

64. 

is flexibility that you have discovered that you need or anything 

else, money, whatever, I want you to pick up the phone and call 

us, and we will do everything we can to help you. You have got a 

very formidable task ahead of you, but I am encouraged by what 

I have heard here this morning. 

Thank you very much. 

Dr. MCCLELLAN. Senator, thank you very much. We truly appreciate your support, and we are looking forward to continuing to 

work with you to get this help to seniors. Thank you. 

Senator VOINOVICH. Thank you. 

We will now call on our next two witnesses: Marcia Marsh and 

Ann Womer Benjamin. I apologize to our two witnesses. I hope that 

you have learned as much this morning as I have. 

Ms. Marsh, thank you for being here today, and we look forward 

to your testimony. 

TESTIMONY OF MARCIA MARSH,1 VICE PRESIDENT FOR AGENCY PARTNERSHIPS, PARTNERSHIP FOR PUBLIC SERVICE 

Ms. MARSH. Thank you. Senator Voinovich and Senator Pryor, I 

appreciate the opportunity to speak to you today about our partnership with CMS on our Extreme Hiring Makeover. That project was 

modeled after the popular television series that I am sure the two 

of you probably do not get to take advantage of watching in the 

evenings. But it brings together the experts from the private sector 

in recruiting and assessment with three Federal agencies. And 

when we first announced this program, the HHS Director called us 

that afternoon and said, ‘‘You really need to meet with the leadership team at CMS.’’ And I stepped up to the plate to take that public challenge right off the bat. 

So where are they? Our heavy lifting in the last several months 

has focused on two key areas. The first is in mapping their hiring 

process, what they are doing, and the second part is in doing a 

demonstration project that will show how they might want to 

model it going forward. And I know when I mention process mapping, your eyes probably glaze over. That is not exactly a sexy 

topic. But it is the way in which we can really get to the information that will demonstrate how long things are taking, why we cannot have qualified candidates on certificates, and how we can fix 

the process. 

So we worked with the CMS hiring managers, their HR expertise, and with their new hires to really map that process. And 

when we completed it, we rolled out the map across a conference 

table like this, and it included 64 steps. And the reaction of the HR 

managers and the managers has been fairly similar: What can we 

do to streamline that? 

So in the next 2 weeks we will be meeting with the CMS redesign team to work on how we remodel that process, and we are 

looking for one that has a goal of efficiency and only value-added 

steps. 

Now, the most exciting thing that we have done is in the demonstration project, and here is where I think CMS is really stepVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
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ping out as a great model for government. We have an illustration 

up here for you of one of those early efforts. 

We worked with some volunteers from the Centers for Medicaid 

and State Operations around the position of a health insurance 

specialist, a GS–13, and we picked that one because it is fairly 

common to CMS and cuts across the entire organization. They are 

going to have multiple openings in the course of the next several 

months. And what we did with that job was to first start to redefine a new look. And we worked with our partners at Monster Government Solutions in trying to put out a new vacancy announcement, and I know, Senator, you have been very keen on what is 

happening in recrafting the image of government. 

And here is an example of the old vacancy announcement appears on your left, and you will see it is very text heavy, a lot of 

Federal jargon, and when you read down into it, you have a lot of 

the ‘‘shall not’s’’ and the ‘‘no’s.’’

The new vacancy announcement, which appears in the new 

USAJobs format, appeals to a candidate right off the bat about the 

mission of CMS and your ability to impact the Nation’s health care. 

We have had a real uptick in response on that basis. 

So I know in our detailed testimony we outline for you all the 

steps that CMS took in this demonstration process. So I would like 

to use this exhibit to just take you through that fairly quickly. 

What we wanted to do because we had multiple openings was to 

attract as many candidates as possible for this particular announcement. Previously, the same announcement within HHS attracted about an average of 53 applicants. And what we did was 

to post it on USAJobs and Monster, but we did not want to settle 

for that. It drove a lot of eyes there. We really wanted to dig deeper 

into some of those people that sit out in the private sector companies and at the States, with apologies to my colleague over here, 

who are those sorts of experts and see if they wouldn’t want to take 

a look at that job announcement. 

So one of our partners in this process, a company called AIRS, 

did an Internet targeting campaign for us when in the last few 

days of this position they went out, they searched candidate resumes from across the country in all sorts of job databases, and 

sent them all E-mail messages saying, ‘‘Wouldn’t you like to apply 

for the CMSO position? You look like you are very qualified.’’

On that basis, when we concluded that operation, we had 227 applicants for this particular position, and 33 of those came from our 

target pool. So we proved the fact that with the better advertising 

and the targeting we can bring a lot of people in the door. 

So how do we select from those candidates to pick the very best? 

And the first thing that a candidate has to do when they apply is 

to answer some basic questions that are prescreening questions, 

and they are in the automated tool that CMS uses called Quick 

Hire. 

What we did there was to just ratchet up that performance a little. Previously, that screen would eliminate about 6 percent of the 

candidates as not minimally qualified. But with sharper questions 

based on the competencies that the CMSO managers outlined, we 

were able to take that up to a 15-percent screen. And then for all 

the people that successfully came to the other side of that, we sent 

34

1The prepared statement of Ms. Benjamin appears in the Appendix on page 85. 

them an E-mail asking them to take a 45-minute skills assessment 

test. It tested their knowledge of Medicare, Medicaid, managed 

care, writing skills, and a variety of other things. We were pleased 

that of about the 200 applicants that successfully managed the 

screen, 169 invested the time to take that particular test. 

On that basis then, we used category ranking, and 24 candidates 

floated to the top. Of those 24 candidates, many were invited in for 

interviews and an additional behavioral interview assessment. And 

as you see on the results here, we had six candidates who were 

hired very quickly. I would like to let you know that the top candidate based on just abilities was a disabled veteran who was interviewed, first interview, first job offer, and he reported for duty yesterday with five new colleagues. Two of those came from our targeting campaign. 

We are excited about folding this into our new process redesign. 

We think that CMS would be a model not only for HHS but for the 

rest of government. And given the fact that every Federal hire is 

important and really represents a multimillion-dollar investment, if 

you look at the personnel costs for a single person over the course 

of their career, we think that managing this kind of process in this 

kind of time will result in a great benefit not only for CMS but for 

the rest of government. 

I look forward to answering any questions that you have about 

the project. 

Senator VOINOVICH. Thank you very much. I am sure that Dr. 

McClellan was very appreciative of your being involved. He has to 

hire 500 people more, or something like that? That is quite a task. 

We are so happy that you are here today, Ann, and, again, I 

apologize that you had to sit around for so long. But you have done 

an outstanding job in the State of Ohio in terms of being the Director of our Insurance Department, and I cannot thank you enough 

for the wonderful help that you have given us during this last year 

or so in trying to sign up as many people in Ohio to take advantage 

of this new drug benefit. We are anxious to hear your testimony 

today. 

TESTIMONY OF ANN WOMER BENJAMIN,1 DIRECTOR, OHIO 

DEPARTMENT OF INSURANCE 

Ms. BENJAMIN. Thank you very much, Chairman Voinovich. I appreciate being here. I am Ann Womer Benjamin, the Director of the 

Ohio Department of Insurance, and I want to thank you, Mr. 

Chairman and Senator Pryor, for the opportunity to provide this 

testimony today. 

CMS has indeed been a reliable and supportive partner working 

with the Ohio Department of Insurance and our Ohio Senior 

Health Insurance Information Program, or OSHIIP, to educate and 

enroll Ohio seniors and Medicare beneficiaries in the prescription 

drug program. 

The Ohio Department of Insurance regulates and licenses approximately 1,740 insurance companies, 180,000 agents, and more 

than 13,000 insurance agencies, and monitors the financial solvency of the insurance industry in Ohio. 

35

Another very important facet of our consumer protection mission 

and of particular relevance today is the Ohio Department of Insurance’s OSHIIP Division. OSHIIP was established in 1991 by thenGovernor Voinovich and plays an essential role in educating Ohio 

seniors and others who qualify for Medicare. Through its toll-free 

help line, 950 volunteers, objective and understandable literature, 

and speakers’ bureau, OSHIIP provides valuable information to 

Ohio’s 1.8 million Medicare beneficiaries. 

I would like to take a brief moment to publicly thank Senator 

Voinovich for his leadership and support of senior and Medicare 

initiatives, including OSHIIP. Further, I would like to thank Dr. 

McClellan for his strong commitment to providing the needed resources and information to educate Ohio’s Medicare population. 

Since the passage of the Medicare Modernization Act of 2003, 

CMS has been instrumental in helping OSHIIP with information 

and resources to prepare and respond to the many changes that are 

coming to Medicare. These efforts could not have been more apparent than last April, when Senator Voinovich and Dr. McClellan 

joined Governor Taft and me at an OSHIIP volunteer training session to kick off Ohio’s introduction of the Medicare prescription 

drug card program. More than 100 community volunteers participated in the training designed by CMS. 

CMS has continued to provide OSHIIP and Ohio consumers with 

invaluable assistance, including many workshops, publications, and 

toolkits to update OSHIIP training teams on the many facets of the 

Medicare program. CMS also seeks the input of all State SHIP programs to ensure that the material is meeting the needs of the consumer and regularly distributes E-mails on critical issues and common problems facing the States. 

Outreach and educational efforts have also increased at the State 

and local levels with the support and coordination of CMS through 

biweekly and monthly conference calls to keep lines of communications open, allowing OSHIIP to have the most current and pertinent information available. CMS also spearheaded Ohio Medicare 

Partners to help answer a wide range of health- and health insurance-related questions here in Ohio. 

In mid-February of this year, CMS introduced its ‘‘2005 REACH 

National Medicare & You Training Program’’ focusing on the new 

prescription drug coverage training module. CMS also facilitated 

working sessions for each State’s Medicare Partners so that coordinated outreach plans could be jointly developed to maximize population penetration and group efficiency. 

Later this year, the Ohio Department of Insurance and OSHIIP 

will be hosting local Medicare prescription drug coverage enrollment and outreach events in each of Ohio’s 29 most rural counties. 

CMS has committed to mailing invitations to these events to the 

low-income residents of these counties. 

The department and OSHIIP have been very pleased with our 

collaboration with CMS, but there is always room for improvement. 

We have experienced some delay in getting training materials 

needed to conduct our volunteer training sessions. We also have experienced delays regarding technical and statistical inquiries we 

make to CMS. While our impression is that CMS is trying to ensure that the proper individuals respond and provide the most acVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
36

curate information in a timely fashion, CMS delays sometimes result in gaps in accurate information being available. 

This year we have received a substantial increase in our annual 

Federal grant to help administer OSHIIP, and Ohio and I thank 

you. We will utilize some of those funds to hire another employee 

to assist in what we predict will be a dramatic increase in calls. 

With the expected increase in our workload, the ever-increasing 65-

plus population, and the many options consumers face, our challenge will be to continue excellent consumer service to those Ohioans struggling to make informed decisions. 

Dr. McClellan has been a real champion of seniors, and his leadership of CMS has reflected this commitment. He and CMS have 

worked hard to take Medicare benefits and options to seniors and 

ways to make their choices easier to understand and evaluate. I 

would like to thank Chairman Voinovich again for the opportunity 

to share the many positive and exciting things we are doing for 

seniors in Ohio. From our perspective, we feel the collaboration 

with CMS has been very beneficial, and we only hope it continues 

to grow. Thank you. 

Senator VOINOVICH. Thank you very much. 

Ms. Benjamin, you have worked pretty closely, as you have mentioned in your testimony, with CMS and just mentioned that they 

have made more money available. Do you feel that the additional 

money made available to the State of Ohio is adequate to give you 

the resources you need to be effective in helping them get the job 

done? 

Ms. BENJAMIN. Chairman Voinovich, certainly resources are always an issue, particularly in a program such as this that continues to grow and expand and the beneficiaries continue to expand. With your encouragement and support last year, we had the 

foresight to continue to develop our volunteer pool, which we have 

done. Last year, we had about 800 volunteers statewide. Now we 

have 950, and that number continues to grow. That certainly helps 

where we have resource shortages because, as I said, we have volunteers who provide information after they are trained freely. 

In addition, we are continuing more and more to use the area 

agencies on aging, senior centers, and other such centers and activities that deal with seniors on a daily basis so that people involved in those programs will also, without direct charge to our 

OSHIIP program, be able to provide not only contact information 

but also valuable enrollment information to the seniors they encounter. 

Senator VOINOVICH. I know that some of the municipal offices on 

aging have been participating. I am very familiar with what is happening in Cleveland. Do they get any resources, additional resources, to do the job that they have been asked to do? 

Ms. BENJAMIN. Chairman Voinovich, honestly, they don’t from 

us. I don’t know if they do from other sources, but they don’t come 

from OSHIIP. The only money that we distribute out from OSHIIP 

is part of our Federal grant goes to the Ohio Department of Aging, 

likewise for outreach programs that are complementary to 

OSHIIP’s. 

Senator VOINOVICH. Has CMS or have you looked out across the 

State to look at the various levels of groups that are providing inVerDate 0ct 09 2002 12:16 Jan 20, 2006 Jkt 021428 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 C:\DOCS\21428.TXT SAFFAIRS PsN: PAT
37

formation to see how it is all coordinated and whether there are 

any holes in the information system? 

Ms. BENJAMIN. That is a continuing challenge, and we have realized, for instance, over the last year that rural counties are a particular outreach challenge. And one of the things that we have 

done over the past year is reach out in particular to rural counties 

to develop our volunteer pool as well as to develop our contacts 

where we perhaps did not have them or did not have as many with 

local senior agencies and centers so that we would make sure that 

we reach those seniors in the more outlying areas. 

Generally the more urban areas have better outreach systems 

and information systems in place for seniors. 

Senator VOINOVICH. Dr. McClellan talked about the Advantage 

plans, and it looks like there is a growing number of people taking 

advantage of them. As part of your responsibilities and information 

distribution, are you making information available about those Advantage plans also? 

Ms. BENJAMIN. Yes. That information is in very comprehensive 

brochures that the OSHIIP program distributes. In addition, we 

have been coordinating our brochures and information with the Department of Aging to make sure that we cover all bases, so to 

speak. 

Senator VOINOVICH. One of the things that I am concerned about 

is that the whole Medicare delivery system to a degree is expensive 

and in so many instances really does not respond to the needs of 

our senior citizens; that is, they come in when they are really sick, 

and too often they do not have a regular physician they go and see 

and have someone looking after them. And it seems to me that if 

someone is encouraged to get into one of these Advantage plans, 

that is a whole lot better way of their getting the kind of medical 

services that they need, including prescription drug benefits. And 

I think anything that CMS can do, and you can do, to at least 

make that information available to people would be very helpful to 

them. As you remember, my motto when I was governor was 

‘‘Working harder and smarter, and doing more with less.’’ And the 

fact is that I think that we would spend less money and we would 

have better service to our Medicare-eligible individuals. 

Ms. BENJAMIN. Chairman Voinovich, if I could expand on what 

you just said, we do at the department, and in OSHIIP in particular, have trained personnel available to answer the telephone 

during business hours during the week to respond to seniors’ questions as to which plan or plans or drug cards would be most appropriate for them. In fact, we also can run the PDAP right there 

while the senior is on the telephone and provide a detailed report 

to that senior within 24 to 48 hours as to what drug card or cards 

would be more appropriate for that senior’s situation. 

We have trained personnel who help senior consumers evaluate 

all their options, and I think that just further adds to the ability 

of these seniors to make informed decisions and to know what all 

their options are. 

Senator VOINOVICH. Thank you. 

Ms. Marsh, during the course of the Extreme Makeover project, 

the Partnership for Public Service learned much about the inner 

workings of CMS, and I would like to say publicly that we really 

38

are grateful for the Partnership for Public Service. Many people are 

not aware that it did not exist several years ago, and that a man 

named Sam Heyman from New York, who was concerned about the 

fact that not enough people were going to government service, created this new partnership, and you have been very helpful in encouraging people, particularly on college campuses, to take advantage of the opportunities to come to work for the Federal Government. 

How familiar was the Partnership with the department before 

you began this project? And how did you get into it? 

Ms. MARSH. How familiar were we with the department or vice 

versa? 

Senator VOINOVICH. How familiar were you—well, I am interested in how you got together. 

Ms. MARSH. We have a monthly meeting with all the HR directors in the major departments in the offices to talk about issues 

that are key to them. And we made comment about this Extreme 

Makeover project, and as I mentioned, that very afternoon——

Senator VOINOVICH. In other words, what you are telling me is 

that the CHICOs—you get together with them once a month, with 

the partner——

Ms. MARSH. Their operating HR directors typically in some of the 

CHICOs come and have a conversation about their issues, what 

they would like to see, and we mentioned the Extreme Makeover 

project, and that afternoon the HHS HR Director called back and 

said, ‘‘I want you to get on the phone right now with the leadership 

team at CMS.’’ So we had an initial conversation, and then met virtually everyone in the organization and their senior leadership 

team, focusing on their key hiring issues and talked about what we 

are trying to do. 

Among the things that we required of an organization was senior 

leadership commitment and an organization that was in pain. We 

did not want to have to educate people in this project. And CMS 

was in pain with the big ramp-up they had, but also their senior 

leader said this is really important, we will sign on, and they have 

been at the table with us throughout this process. 

Senator VOINOVICH. So, in other words, they found out about you 

through the meetings that you had once a month. 

Ms. MARSH. That is right. 

Senator VOINOVICH. And wasn’t it the Partnership for Public 

Service that also brought, was it, Monster to the Department of 

Personnel? 

Ms. MARSH. Well, actually, Monster had responded to the RFP 

that the OPM had put out to modify USAJobs, and they have been 

one of our partners in this endeavor and, in fact, had introduced 

us to many of the other individuals and firms that came together 

as part of this hiring effort. And I should point out that all the efforts that we have had from all of these firms have been pro bono. 

So they have dedicated hundreds and hundreds of hours to the effort among three agencies to try and really create a successful 

model within the Federal Government. 

Senator VOINOVICH. It is interesting because when we got started 

with this human capital challenge that we had to create a situation 

where we would be able to attract the best and brightest to the 

39

government, we had an executive session that was sponsored by 

Harvard University, and the folks from Monster were at the table 

with us. We tried to get the best and brightest people in the country together to talk about how does the Federal Government attract 

the best people and at the same time have an environment where 

you keep the best people working for you. And so this has just 

moved along, hasn’t it? 

Ms. MARSH. It has, and I think, Senator, it was at one of your 

hearings where Jeff Taylor, who is the CEO of Monster, rolled out 

a 47-page job announcement—I think that might have been one of 

yours—just to say, ‘‘How does a candidate plow their way through 

47 pages and who is intrepid enough to want to do that?’’

Senator VOINOVICH. Well, I have heard complaints for a long 

time about the fact that they make it difficult for us to go to work 

for the Federal Government. 

Ms. MARSH. And I think in showing the new and improved advertisement—and much credit given to OPM. They have this new 

five-template format that starts with ‘‘What is your mission? What 

are you really looking for? Let’s sell the benefits.’’ There has been 

a lot of momentum in the last couple of years. 

Senator VOINOVICH. Great. And are there any impediments that 

you have noticed over there that we might try to knock down? 

Ms. MARSH. At this point, we do not have any. We are still trying 

to consider—we are still trying to go through all of the findings. We 

are completing our 2(b) process. What we are trying to do is to look 

and see if agencies could make improvements with the existing 

flexibilities that have been given out in the last couple of years. So 

we certainly see that we are able to do a lot. That example that 

I gave you was not a direct hire authority example. It was with the 

existing flexibilities. 

There may well be. 

Senator VOINOVICH. Now, they came to—we changed the law to 

give direct hiring, but they had to come to the Office of Personnel 

Management to get permission to do the direct hires. 

Ms. MARSH. They did, and they have been very successful with 

those. And part of our endeavor is to look at their ordinary hiring 

and the non-direct hires to make sure that we can backfill some of 

those positions that will be subject to the retirements that you 

mentioned earlier on. 

When we finish this project across all three agencies, we are 

really looking at investments in the HR function. As you well 

know, that strength has been depleted over the course of the last 

couple of decades with retirement and downsizing. So one of the 

things we may want to come back to the Subcommittee with is 

some observations about some special investments in the HR function across government, sort of Clinger-Cohen-type endeavor for the 

very important HR assets. 

Senator VOINOVICH. Thank you. Do either one of you have anything else, any comments? You have heard the lengthy testimony 

and the questions to Dr. McClellan. Any comments that you would 

like to make in conclusion? 

Ms. MARSH. The only thing I would say, they have a massive 

challenge. Having come from a private sector benefits consulting 

organization, I understand what it is like to roll out on a private 

40

sector company a major endeavor like this. And this is a scale that 

just boggles the human imagination, what you all have to do collectively over the course of the next couple of years. So it is really a 

privilege to try and assist that particular organization doing something that is as important. 

Senator VOINOVICH. Well, I want to thank you and the Partnership for Public Service for stepping forward and helping us out, 

and I look forward to your recommendations on how we can help 

other agencies get the job done. And, Ann, thank you very much 

for all the good work that you do in Ohio. I think that the partnership that we had between CMS and the Department of Aging and 

the Department of Insurance is probably one of the best in the 

country, and I think that had it not been in existence, we wouldn’t 

have had the number of people sign up for the discount drug card. 

I think there is a tendency out there to kind of feel it is all in the 

hands of the Federal Government, but I learned when I was governor that when new programs come out, people usually do not call 

the Federal Government, they call State Government. And I knew 

that it was coming, and our folks just did a great job, and I am 

so grateful to you. 

Ms. BENJAMIN. Well, I really appreciate that, and I thank you for 

your help and encouragement along the way, you who are so familiar with the OSHIIP program from its very beginning, and I have 

to say it indeed has been a challenge and will continue to be a challenge as the program changes to get the information out to the people who need it. But we are doing everything we can at OSHIIP 

to get that information out, and CMS has truly been a very helpful 

partner and continues to be so. If we have problems, we call the 

regional people and they respond generally very quickly. 

Senator VOINOVICH. Well, if they don’t, you call me. 

Ms. MARSH. I will. Thank you. I will take that. [Laughter.] 

Senator VOINOVICH. Thank you very much. The hearing is adjourned. 

[Whereupon, at 12:13 p.m., the Subcommittee was adjourned.] 

(41)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR COBURN 

On Tuesday, March 23, the Medicare and Social Security Trustees released their 

annual report on the financial status of the Social Security and Medicare trust 

funds. 

I’d like to just take a minute to go over some of the findings of the Medicare trustees report and the drug benefit. 

The Medicare report shows the Hospital Insurance Trust Fund in a deficit state 

by 2010 (just four years away) and in bankruptcy in 2018. The report also shows 

a significant unfunded liability for the Medicare program. 

From what I understand from reading the report and the laws and regulations, 

the cost containment provision would be triggered next year. The way I understand 

the provisions, there is a ‘‘cap’’ on the general revenue amount that can be spent 

on the total Medicare program—this cap is 45 percent. It is estimated that 45 percent of total Medicare spending will be funded by general revenues within the next 

7 years, if this is the case then the cap would have been reached and this would 

initiate a trigger that would result in either cutting the program benefits or increasing dedicated program revenues either through premium increases or dedicated payroll taxes. If this is the case, then it is my understanding that in next year’s report 

the trustees believe they will issue the warning that the cap will be reached within 

7 years and the cost containment process will be activated to implement ‘‘corrective 

action.’’ I find the instability of this system disturbing. I look forward to hearing 

the testimony of our distinguished witnesses.

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